Data released on Friday showed that the UK’s deficit on trade in goods and services was estimated to have been £4.5 billion in July 2016, a narrowing of £1.1 billion from June 2016; and that exports increased by £0.8 billion, while imports decreased by £0.3 billion, worse than market's expectations. Some caution also appeared to be creeping in, ahead of this week's Bank of England policy meeting, and a string of UK data that should offer further clues on how the economy is faring after June's vote to leave the European Union.
Sterling hit a one-week low against the Dollar on Friday, as the greenback rallied on revived hopes that U.S. interest rates will be hiked soon. This came after Fed Bank of Boston President Eric Rosengren said that gradual rate increases might be in order, and low interest rates were raising the chance of an overheated economy.
Rosengren’s hawkish comments sent the odds for a rate hike this year to above 60 percent. Odds on a rate hike in September rose to 30 percent probability from 24 percent before his comments, although Rosengren did not comment on whether he expects to back a rate hike this month or even this year. However, Federal Reserve Governor Daniel Tarullo also spoke, contrasting Rosengren in saying that he wants to see more evidence of a sustained uptick in inflation toward the Fed's 2 percent target before raising rates. Although the greenback weakened versus all of its 10 major peers over the last week, it rallied on Friday.