The pound was left under pressure as two policymakers, Michael Saunders and Jonathan Haskel unexpectedly voted to lower rates, while BoE Governor Mark Carney warned that the global economic outlook had darkened, adding that the world was in “a low growth, low inflation rut”. He also explained that the bank might need to ease policy if global growth failed to stabilise or if the UK remained mired in Brexit uncertainty.
Meanwhile, the single currency edged up against the pound despite the European Commission slashing growth forecasts and warning of “growing headwinds”.
The Commission expects the European Union to grow by 1.1 percent in 2019, down from its previous estimate of 1.2 percent. Added to this, 2020 growth predictions have been cut from 1.4 to 1.2 percent.
Meanwhile, the bloc’s largest economy is only expected to grow by 0.4 percent this year, with German GDP only expected to rise 1 percent in 2020.
Commenting on the EU growth forecasts, EC Vice President Valdis Dombrovskis said: “Economic growth has continued, job creation has been robust and domestic demand strong. However, we could be facing troubled waters ahead: a period of high uncertainty related to trade conflicts, rising geopolitical tensions, persistent weakness in the manufacturing sector and Brexit.
“I urge all EU countries with high levels of public debt to pursue prudent fiscal policies and put their debt levels on a downward path. On the other hand, those Member States that have fiscal space should use it now.”
Looking ahead, the single currency could be left under pressure on Friday following the release of Germany’s trade balance.
If exports fail to rebound from an expected August slump, it could signal trouble for the export-reliant German economy and see euro sentiment slide.