The British pound seesawed in the week ending January 24, 2020, as the latest bout of economic news for the UK left traders divided on whether to still expect the Bank of England to lower its base rate at this week’s Monetary Policy Committee meeting. In last week’s newsletter, we noted how interest-rate futures markets had assigned a 72% probability to a 25-basis point cut, following previous signs of economic weakness. Meanwhile, the most recent labor-market report exhibited the lowest unemployment rate since the 1970s, while the more forward-looking purchasing manager index indicated that the UK economy may be growing again, lifting GBP/USD by 0.7% by mid-week. Yet, the pound gave up most of its gains afterwards, as futures traders remained almost evenly split about Thursday’s rate decision.
Please refer to figure 6 of the current Multi-Asset Class Risk Monitor (dated January 24, 2020) for further details.