It’s shaping up to be a bad week for the pound with the currency falling across the board and dropping to its lowest level in almost 3 weeks against the US dollar as the rate dips back below the $1.23 handle.
The return of parliament has perhaps caused a little more caution in the markets as investors are starting to feel that the bounce in the pound that we’ve seen in the past month is based on an overly optimistic assessment of the current risks.
The latest declines come after Michael Saunders stated the Bank of England may lower interest rates due to Brexit uncertainty.
Quite why this is moving the markets is unknown to be honest with the biggest surprise being that this is seen as a surprise at all.
Economic data has been poor on the whole and while it looks like a technical recession will be avoided with a rebound to GDP growth probable in the 3rd quarter, the levels of activity seen in other metrics such as retail sales and PMIs suggest that the economy is still barely keeping its head above water. Throw in the almost universally acknowledged continued levels of heightened uncertainty on the political front, with markedly divergent Brexit paths still possible and it is actually pretty shocking that a comment that a rate cut is “quite plausible” has caused such a response.