The British pound was one of the weakest major currencies, which has been somewhat of a trend over the past few days as speculation about the outcome of Thursday’s Bank of England meeting builds.
Today, Lloyds Banking Group’s UK Halifax house price index said that home prices unexpectedly fell by 0.5 percent in June to an average value of 157,713 pounds. The decline is in line with the drop we saw in Rightmove’s June results, and suggests that the UK housing market remains on uneven ground.
Looking ahead to Thursday at 7:00 ET, the BOE is expected to leave rates unchanged for the fourth straight month at an all-time low of 0.50 percent. The central bank’s last policy statement essentially signaled a neutral stance, as no expansions to their quantitative easing (QE) program have been revealed. That said, the final reading of Q1 GDP for the UK was unexpectedly revised down to an annual rate of -4.9 percent, the lowest since record keeping began in 1956, from -4.1 percent. This leaves GDP at the bottom of the BOE’s previous range of forecasts, and may push them to consider increasing the scope of their QE program, and signs that this is occurring within the BOE’s policy statement on Thursday could weigh heavily on the British pound. However, the British pound’s recent declines may signal that the markets are already pricing in a QE expansion, and if the BOE fails to go this route, the currency could actually rally in response.
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