Summary:
Sterling remained flat amid weak UK economic data and holiday trading, with a bearish outlook, though market movement remains limited.
Sterling barely moved on Thursday in thin holiday trading. The forex market is likely to be muted through next week as the year draws to a close with the economic calendar very light.
Britain's economy failed to achieve any growth in Q3. revised figures from the ONS showed. A series of weak data prints have dampened sentiment and raised questions about Labour's fiscal strategy.
Its budget has been met with some criticism. The national insurance payroll tax hike, for example, has prompted warnings from businesses that they will be less likely to take on new workers.
Meanwhile, consumer prices rose 2.6%, marking the second straight month of an upward tick in prices. Below-trend growth combined with sticky inflation is the worst scenario for policymakers.
While Governor Andrew Bailey has previously signalled four rate cuts could be possible next year, traders are divided over when the central bank will resume lowering interest rates anytime soon.
Business confidence fell to its lowest level of 2024 in December but employers were a bit more optimistic about the wider economy, according to the latest t Lloyds Bank Business Barometer.
Bearish bias for the pound remains intact with few signs of a reversal. Despite that, we see a decisive break below 1.2500 as unlikely given expected tranquillity of financial markets over the rest of the year.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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