The UK has released overall negative economic data this week, but the Pound has been undeterred by the news. Whilst the jobs report on Tuesday showed more people were in work during July (good news for the UK), the main release of the day was average earnings.
Average earnings have been a thorn in the side to the BoE, who need the readings to fall inline with inflation before being fully happy to cut the interest rate much further. A drop from 4.6% to better than expected 4% was a welcome sight for policymakers (bad news for GBP).
Yesterday, the currently lesser cared for industrial and manufacturing production figures easily missed targets, as did the trade balance number. But it was the UK's GDP that was the main event and it too failed to hit expectations. It means the UK has flat-lined for 2 consecutive months now, which is of course a cause for concern.
Q1 saw the economy grow by 0.7%, Q2 was 0.5% and now there is a worry that Q3 & Q4 could continue to the downward trend and create stagflation, without the help of the BoE stepping in and cutting interest rates further and faster.
Speaking of interest rates and the ECB are expected to cut by 25bp this afternoon which has already been priced into the market. President Lagarde is expected to avoid offering any forward guidance, which means any deviation from this narrative and the expected 25bp result, will cause market volatility.
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