Pound Under Intense Pressure as UK’s Economy Weakens

The British pound (GBP) is expected to conclude the week under significant pressure against the US dollar (USD) after weak economic statistics on Friday stoked concerns about a possible national economic recession.

Base rates reached peaks not seen since 2008 (3.5%) on Thursday as a result of the Bank of England’s (BoE) 0.5% percentage point interest rate increase. However, even that was insufficient to stop the greatest daily decline in the GBP/USD pair in the past six weeks, emphasizing the predicament in which the pound finds itself.

Even though six of the nine members of the Monetary Policy Committee in London voted in favor of it and one additional member sought more strict action, the market perceived the move as a dovish rate hike.

Pound Declined Despite BoE’s Attempt to Justify More Rate Hikes

The Bank is not necessarily inclined to postpone further rate rises as a result of this disagreement. Indeed, among central bankers, Bank of England Governor Andrew Bailey stood out for speculating that there may be some reason to be hopeful about a slowdown in inflation.

He did, however, make the argument that given how tight labor conditions were in the area, more rate increases would probably be justified. However, the market made its decision, and the pound declined accordingly.

Finally, the World Cup and Black Friday deals failed to convince UK customers to part with the meager amount of money that inflation has left in their wallets, according to news reports on Friday.

According to official data, sales volumes decreased by 0.4% in November, worse than the 0.3% decline predicted. Consumer confidence increased somewhat this month but is still very low, according to market researchers at GfK.