- The Pound Sterling strengthens against its entire peers after the United Kingdom (UK) Office for National Statistics (ONS) reported in its revised Q1 Gross Domestic Product (GDP) report that the economy expanded at a higher rate of 0.7% quarter on quarter (QoQ) than estimates and the preliminary release of 0.6%. On an annualized basis, the economy grew by 0.3%, upwardly revised from 0.2%.
- Meanwhile, uncertainty ahead of UK elections and the timing of the Bank of England (BoE) rate cut will keep the Pound Sterling on its toes. According to the latest exit polls, the Opposition Labor Party is expected to win from the UK Prime Minister Rishi Sunak-led Conservative Party.
- For the BoE rate-cut timeframe, investors expect that the majority of officials will vote for reducing interest rates in the next monetary policy meeting, which will be held on August 1. Policymaker Swati Dhingra and Deputy Governor Dave Ramsden have been supporting rate cuts, and it will be crucial to see which members join them.
- The reason for the high probability of the BoE lowering borrowing rates in August is the return of annual headline inflation to the bank’s target of 2%. However, price pressures in the service sector are still higher than what is required to make rate cuts appropriate
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