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S&P’s Weighs in on UK Interest Rates, UK Services Rise

04 October 2017 by FC Exchange

Exchange rate experts FC Exchange discuss today's market developments and how that's impacted the GBP/AUD exchange rate.

Wednesday saw prestigious credit ratings agency Standard and Poor’s (S&P’s) wade into the interest rate debate. Bank of England (BoE) Governor Mark Carney has recently taken a slightly more hawkish stance, suggesting that the bank may be close to increasing interest rates in the near future on account of climbing inflation.

However, S&P’s stated that it wasn’t sure that the economy was strong enough to warrant a rate rise, especially in the face of Brexit. The credit ratings agency said: ‘We remain a bit sceptical as to how justified such a hike would be in the near term. Overall, we believe the Bank and Mark Carney’s recent statements are primarily aimed at propping up sterling to reduce imported inflation pressures. This strategy may include an actual 25 basis point hike in November, thus bringing the policy rate back to where it was before the Brexit referendum. Additional moves in 2018 do not appear warranted on the back of a slowing economy.’

Meanwhile, the pound had an opportunity to rise against other currency majors when the UK services purchasing managers’ index (PMI) came in better than expected at 53.6 in September. Economists had expected the index to remain static at 53.2. Meanwhile, Eurozone retail sales surprised to the downside in August, coming in at 1.2% on the year, rather than the 2.6% forecast. The month alone contracted by -0.5%, rather than registering the 0.3% expansion economists had predicted.

The pound to Australian dollar (GBP/AUD) exchange rate is currently trending in the region of 1.6920.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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