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British Pound: Struggling to Hold Onto Gains

The British pound is struggling to hold onto its gains against the US dollar.

There was no UK economic data released today, but Bank of England Economist Dale warned that there are opposing risks to inflation.  Even though CPI is higher, he believed that slower growth would ease inflation in the coming months.  Sterling traders should now realize that the Bank of England does not have much choice when comes to inflation which is why they are banking on the hope that slower growth will drive down price pressures.  Earlier this week, UK labor market data was released and according to the report, unemployment rose by the largest amount in 16 years.  Don’t forget that service, manufacturing and construction sector PMI all contracted in same month, which reflects the vulnerability of the UK economy.  Public sector finances, net borrowing and money supply data are due for release tomorrow – these are Tier 2 economic data which means that they will not be particularly market moving.