This past week was an important one for sterling and while there were both positive and negative economic reports, there’s no question that the latest round of U.K. data supports the case for slower monetary policy
removal. Consumer prices declined in the month of July, leaving the year over year growth rate at 2.6%. However labor market conditions improved last month with wage growth accelerating and consumer spending rising but these reports did not have a lasting impact on the currency because the uptick in spending was offset by a sharp downward revision in June. These reports paint a picture of uneven growth and when taking the Bank of England’s recent downgrades into consideration, there’s evidence that the central bank
is in no rush to normalize monetary policy
. For this reason, we would not be surprised to see sterling extend its losses particularly against the U.S. dollar and Japanese Yen
With growing market expectations that the Bank of England is unlikely to raise interest rates over the coming months due to Brexit-related risks and business uncertainty, the pound slipped towards a fresh 8-month low on a trade-weighted basis.
Noise around Britain's strategy for leaving Europe and the talks on the issue with Brussels have provided little positive for investors worried that the process is becoming increasingly chaotic and may do longer-term damage to the economy.