The British pound has continued to suffer as concerns over the UK’s EU referendum unnerves investors.
UK economic data also continues to disappoint, leaving the pound vulnerable to further declines. Recent industrial output data released by the Office for National Statistics was exceedingly weak, with production down 0.7% between October and November 2015. Tumbling global oil prices continue to drive fuel costs lower which will help keep UK inflation depressed, further playing into the hands of the MPC doves.
Today’s Bank of England interest rate decision due at lunch time seems a foregone conclusion with yet another no change vote. The only remaining rate hawk MPC member, Ian McCafferty may change sides, as the UK economic climate deteriorates with overall sentiment looking downbeat and growth forecast for 2016 likely to be revised downwards.
The European Central Bank (ECB) will deliver its latest interest rate decision on January 21st, although today a report will be released to help highlight the reasons behind the December decisions to cut the deposit rate by just 10 basis points and extend the asset purchase programme by 6 months rather than increase the monthly amount, which disappointed the financial markets at the time.
Whilst its seems highly unlikely that the ECB will alter its stimulus measures again any time soon, the markets will be looking for any hints to help second guess future ECB policy adjustments.