British Pound: Next Central Bank to Surprise?

The British pound continued to range trade as economic data provided little guidance on whether the Bank of England will be the next central bank to lower interest rates this week. Like the Bank of Canada rate decision, going into the BoE rate decision, only 60 percent of traders expect the central bank to make a move. Although economic data is also weakening with retail sales and construction sector PMI falling last month, producer and consumer prices are on the rise. Therefore the BoE does not have as much flexibility as the BoC to lower interest rates. It’s a tough call though because UK LIBOR rates are skyrocketing and the central bank may want to measures to offset that pressure by easing monetary policy. Service sector PMI due out tomorrow could help clarify what the central bank may do on Thursday.