On Thursday, the Sterling hit its highest level since June 2022, while the US dollar remained at a two-month low following a slowdown in US inflation. The UK economy

experienced no growth in February, primarily due to strikes by public workers, but a January bounce was stronger than previously estimated, suggesting that a recession is less likely to occur in the first quarter of 2023. According to Simon Harvey, head of FX analysis at Monex Europe, the UK data has little influence on monetary policy. The pound traded 0.2% higher against the dollar at $1.2507 at 1040 GMT, while the pound versus the euro (EURGBP) dropped 0.1% to 88.10 pence.

While an upward revision to January’s growth to 0.4% from 0.3% implies that Britain is probably going to avoid the first-quarter contraction, the data expected next week is viewed as more significant for monetary policy. As per Harvey, “Data next week on inflation and retail sales, but especially jobs data for February, will be crucial because the PMI for the month suggested maybe demand has picked back up again.”

The Bank of England has raised interest rates 11 times consecutively in its battle against inflation, which reached 10.4% in February. The market has a 64% probability of a further 25 basis point increase in May, with a lesser chance of no change IRPR. “We don't think they're going to hike again,” says Harvey, “but there is a non-negligible risk that they would if the data comes in quite strong.”

The focus remains on a murky economic background. A survey conducted by the Bank of England on Thursday indicated that UK lenders anticipate restricting the supply of mortgage loans in the coming quarter, while increasing the supply of consumer credit and corporate loans. Meanwhile, a March survey indicated that the UK's housing market continued to be affected by higher borrowing costs, but property surveyors anticipate some improvement in the year ahead as they believe interest rates are now at their peak. Photo by Hong Kong Global Exchange, Wikimedia commons.