Sterling remained steady on Friday as the latest data from the Office for National Statistics showed that the British economy grew 7.5% in 2021, rebounding “from its historic 9.4% plunge in 2020 when pandemic restrictions stifled activity”. On a monthly basis, in December UK GDP contracted by 0.2% “as the Omicron COVID-19 variant forced renewed cautions and containment measures”. While this is somewhat disappointing, forecasts had predicted a greater contraction of 0.6%. The Bank of England are now expecting UK inflation to peak at 7.2% in April and for the first time since 2004, imposed back-to-back interest rate hikes in February, raising the main Bank Rate from 0.1% to 0.5% in order to tame inflation.
The Dollar suffered another blow on Friday as February’s preliminary Michigan Consumer Sentiment hit a 10-year low as “inflation fears mount”. This followed Thursday’s news that “consumer prices recorded their largest annual increase in 40 years in January, which prompted markets to price in a hefty 50 basis points interest rate hike from the Federal Reserve next month”. The data showed that sentiment among US households with incomes of $100,000 or more dropped by 16.1% from last month.
GBPUSD opened on Friday at 1.3558 and closed on the cusp of 1.36, finishing the day finally at 1.3599.
GBPEUR was also able to gain some upside on Friday. The pair opened the day at 1.1901 and closed the week at 1.1928.
Despite falling short against the Pound, the Euro was able to capitalize against a weaker US Dollar. EURUSD opened the session at 1.1392 and was able to surpass 1.14 by the close, ending the week at 1.1404.
On the data front, it’s a quiet schedule today with no important data releases. At 16:15, European Central Bank President Christine Lagarde will be speaking. Investors will keen to hear if Lagarde makes any comments regarding inflation or future monetary policy.