On Monday, the British pound recorded declines against a US dollar that was broadly strong at the beginning of the week.
The focus this week is on the price pressures and the labor market’s strength, which will be assessed by traders and the Bank of England (BoE) alike.
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Currently, the markets are turned towards the jobs data, which is scheduled for release on Tuesday, along with inflation figures scheduled for release the next day.
The said data would provide clues about whether the Bank of England (BoE) would opt for yet another 50 basis points increase in the interest rate for the second time in its September meeting.
It is expected that the headline consumer price index (CPI) would have risen to 9.8% in July.
As of now, an 85% chance has been priced in by money markets about the rate hike of half a point at the September meeting of the British central bank.
Moreover, the total increase in the interest rate by the end of the year is expected to be around 125 basis points.
The majority of economists have stated that they expect the BoE to hike the interest rates by another 50 basis points in its coming meeting the next month.
Analysts said that even though it is expected that the tightness in the jobs market is easing, it was unlikely that the data would be enough to drive the BoE into pulling back from a 50 basis points increase.
There was a 0.33% drop in the British pound by 0829 GMT against the US dollar, which saw it reach $1.20955.
But, the sterling did not change much against the euro, as it was trading at a value of 84.555 pence.
Meanwhile, Andrew Bailey, the Governor of the Bank of England (BoE) told Nadhim Zahawi, the finance minister of Britain, that he was ready for a review of the mandate of the central bank.
Previously, the front-runner in the race of the British Prime Minister and the leader of the Conservative Party, Liz Truss had also said that she would conduct a remit of the BoE’s policy.
Truss is currently leading the contest with 22 points higher than her competitor, Rishi Sunak. The announcement of the contest’s winner would be made on September 5th.
It is not just the British currency that is struggling against the US dollar, as many other currencies recorded declines against the greenback.
This was because weak Chinese economic data saw the safe-haven currency record gains, as it fueled worries about a global recession.
The weakening in the second-largest economy in the world came as a surprise, as it had begun a nascent recovery recently, after the property crisis and the draconian lockdowns in the country.
Investors are now turned towards the UK data due on Tuesday for more clues about how the Bank of England intends to move forward in order to keep the economy running.
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