British Pound Sterling



The pound sterling (Currency:GBP) is broadly weaker this morning, a weak UK economy is key to sterling-negative expectations that the Bank of England will ease policy year further.

The pound euro exchange rate is 0.1 pct in the blue at 1.2794.

The pound dollar exchange rate is 0.37 pct in the red 1.5686.

The pound Australian dollar exchange rate is 0.17 pct lower at 1.4996.

"Very weak UK GDP figures may add extra impetus for the MPC to ease policy further. After expanding the asset purchase program at the last meeting and following the ECB deposit rate cut, this may come in the form of a rate cut. Currently, the market is not pricing any change," says a FX note from Deutsche Bank.

Key drivers for the pound this week will remain linked to the domestic economy.

A series of UK PMI data next week will be important following disappointing Q2 preliminary GDP announced last week.

"The existence of special factors such as weather and holidays makes it difficult to interpret the GDP data, and PMIs will shed more light on the underlying strength of UK economy. Our forecast is very much in line with the consensus, looking for manufacturing PMI (Wednesday) of 48.5 (cf. 48.4), construction PMI (Thursday) of 49.0 (cf. 48.7) and service PMI (Friday) of 51.5 (cf. 51.6)," says a note from Barclays.

Barclays confirm that they do not see the Bank of England acting this week, but the event should not be ignored:

"The BoE rate decision (Thursday) becomes another local risk event to GBP, but it is widely expected to hold the policy rate and amount of asset purchases unchanged. Overall, we do not see these pieces of data being a catalyst for a strong directional move in the GBP, however may add to GBP volatility over the course of next week."

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