Sterling steadied today after a batch of very poor monthly output readings drove it to its worst week in a month, casting doubt on the Bank of England’s surprise warnings that it is on the verge of raising borrowing costs.
A strong U.S. payrolls report on Friday afternoon added to the pain for the pound after unexpected falls in already very slow UK construction, manufacturing and industrial output.
That raises the stakes around UK wage and unemployment numbers this week; poor readings could further undermine the credibility of BoE officials’ statements around possible rate hikes in the coming months.
The outlook for the economy and BoE rates have dominated the month trade since a shocking electoral setback for Prime Minister Theresa May on June 8.
Many companies and investors had begun to believe the worst of the pound’s post-Brexit referendum sell-off was now behind them. But there are also nerves that a weak government and the impact of a slow departure from Europe on growth and investment leaves the currency exposed over the coming years.