The sterling fell nearly 1.2% against the greenback this week after the Bank of England held rates at 0.5% on Thursday. The central bank declined to release an accompanying policy statement, suggesting that their sluggish outlook for the UK economy remains unchanged. The pound’s losses accelerated on Friday after a weaker than expected print on industrial and manufacturing production grossly missed consensus estimates, fueling speculation that the domestic recovery may be losing momentum.

Andrew Sentence’s departure from the Monetary Policy Committee last month marked the loss of the BoE’s most vocal hawk. And while the exact count for this week’s vote will not be known until the June 22nd when the meeting minutes are released, the results will be of interest as it will be the first for newcomer Ben Broadbent. In light of the recent string of weaker data, it is evident that the committee’s hold on rates last month was the right move. But with inflation concerns continuing to persist, it seems that central bank officials have shifted their focus more toward ensuring economic growth than curbing rising inflation. That said, the sterling may continue to see interest rate expectations diminish with Credit Suisse overnight swaps now factoring in only 25 basis points in rate hikes for the next twelve months, down from nearly 30 at the start of the week.

The sterling continued to bottleneck into a horizontal wedge formation dating back to May 31st until Friday when a break of the lower bound trendline saw the pound plummet nearly 0.9% on the session. And while the this week’s move suggests further weakness for the sterling, a daily chart sees the pair still within the ascending channel that dates back to early February. A break below the lower bound channel support followed by a move below the long term 50% Fibonacci extension taken from the 2009 and 2010 troughs at the 1.60-handle, confirms the trend reversal on the GBP/USD pair.

Event risk for the pound escalates next week with May CPI and RPI data on tap for Tuesday. Inflation and retail prices are expected to hold at 4.5% y/y and 5.2% y/y respectively. UK employment figures hit the wires on Wednesday, with consensus estimates calling for the addition of 6.5K jobless claims, down from the previous print of 12.4K. While the employment rate is widely expected to hold at 7.7%, a weaker than expected print on these figures could exacerbate the pound’s decline as concerns about the faltering UK economy take root.

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