Can the pound maintain its rally despite the hit from lockdown?
The pound, which has rallied this year despite a faltering UK economy and post-Brexit trade frictions with the EU, faces a double-threat on Wednesday with the release inflation and retail sales data for January.
Analysts said that while figures released on Friday revealed the UK had avoided a double-dip recession, caution was still needed. A disappointing performance in the services sector — which has been hit badly by a strict national lockdown — could stoke concerns that the Bank of England will be forced into offering further monetary policy accommodation.
The central bank has indicated that it does not expect to bring interest rates into negative territory from 0.1 per cent currently. However, it has asked commercial banks to prepare in case it needs to deploy such a measure to prop up the British economy.