The British pound continues to trade sideways this week. In Thursday’s North American trade, GBP/USD is trading at 1.3533, down 0.10% on the day. On the release front, it’s a busy day on both sides of the pond. British Manufacturing Production declined for a second straight month. The reading of -0.1% was just above the forecast of -0.2%. Britain’s trade deficit widened to GBP -12.3 billion, above the estimate of -11.2 billion. As expected, the Bank of England held the course on monetary policy, maintaining interest rates at 0.50%. In the US, unemployment claims dropped to 211 thousand, easily beating the estimate of 219 thousand. US inflation numbers were not as strong. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. On Friday, the key event is UoM Consumer Sentiment.
Market predictions about the Bank of England were on the money, and the pound has showed little reaction on Thursday. As expected, the BoE held rates at 0.50%, with only two of nine MPC members voting for a rate hike. In the inflation report, policymakers noted concern over softness in consumer borrowing and the housing market. The markets were not surprised by the BoE decision, given the fact that first-quarter growth was just 0.1% and consumer spending an inflation levels weakened. Policymakers are hopeful that economic growth will rebound in Q2, and are adopting a wait-and-see attitude towards rate hikes, with a rate hike unlikely before August, which is when the next inflation report will be released.
