The Bank of England is widely expected to raise interest rates today. The current rates stand at 1.25% but the rate could go as high as 1.75% today with a 50 basis points increase. Inflation remains a big issue as it reached 9.4% in June and is expected to reach up to 11% by the end of the year. Effects are being seen mostly with consumers as retail sales went down by -5.9% in June and energy bills are soaring. However, the British economy remains more resilient than its European and American counterparts with unemployment currently standing 3.8% and a GDP growth in the positive at 0.4% in Q2. Services also remain in expansion as data from yesterday show, with a PMI at 52.6 in July but the industry is slowing down as it went down from 54.3 in June.
European services PMI also remains in expansion with a eurozone Services PMI of 51.2 for July, well helped by the French services PMI which stands at 53.2, and despite a German services PMI in contraction at 49.7, showing a sector deeply affected by the war in Ukraine and the rising cost of energy.
American services PMI is also in contraction and shows the American economy is once again showing very worrying signs as GDP fell again by -0.9% in Q2, after previously falling by -1.6% in Q1.
The Indian rupee is facing intense selling pressure in recent weeks, a depreciation attributed to external reasons by Indian Finance Minister Nirmala Sitharaman. The currency reached record lows as the currency reached 80 rupees for a dollar twice in July, recovering only as the Reserve Bank of India intervened by raising interest rates to 4.90%, with another hike expected tomorrow, and by levering the country’s foreign exchange reserves.
Cable lost -0.24% yesterday. GBPUSD opened at 1.2178 Monday and closed at 1.2143 on Wednesday.
GBPEUR followed a similar trend with -0.21%. The pair opened at 1.1974 and closed at 1.1945.
EURUSD remained stable. The pair opened at 1.0166 and closed at 1.0164.