Bank of England Governor Andrew Bailey commented that despite the bank being realistic in regards to the possible challenges that negative interest rates could pose for the British financial system, they’re not ruling out imposing them as an attempt to aid the performance of the economy.

Last week, the pound sterling recovered from the previous week’s losses, gaining 1.46 percent and closing Friday’s session at the 1.2931 level.

Conversations between the UK and the European Union continued last week, hinting the possibility of reaching a Brexit trade deal. Despite the final round of official negotiations ended without any important advance, the EU Commission President Ursula von der Leyen held a call with the UK prime minister Boris Johnson, agreeing on the importance of finding an agreement and convincing both sides that reaching an accord is possible.

The pound rose ahead of the meeting on Friday, closing the session and the week in the positive territory, and recovering from the previous week’s 1.32 percent loss.

Last week the markets got a few important pieces of information about the state of the British economy. On Tuesday, the  Bank of England reported that net lending to individuals stood at 3.4 billion pounds in August, dropping from July 3.9 billion pounds (month-to-month). Consumer credit stood at 0.3 billion pounds in August, after being at 1.052 billion pounds in the previous month and below the analysts’ expectations, who foresaw it to be 1.45 billion pounds.

In monthly terms, M4 money supply dropped by 0.4 percent in August, after advancing by 0.8 percent in July and considerably below the surveyed analysts forecast, which was at 1.3 percent. In yearly terms, the money supply expanded by 12.1 percent in August, after being at 13.4 percent in July. Mortgage approvals rose, going  66,300 in July to 84,700 in August, over the analysts’ expectations, who foresaw a 71,000 expansion. The shop price index was at -1.6 percent in August (year-to-year), remaining unchanged from the previous month’s figure.

Bank of England Governor Andrew Bailey commented that despite the bank being realistic in regards to the possible challenges that negative interest rates could pose for the British financial system, they’re not ruling out imposing them as an attempt to aid the performance of the economy.

“That does not mean to say that we rule out using negative interest rates for a moment,” he said after pointing out that the big share of retail deposits in the UK’s banking system could undermine the effectiveness of imposing negative cash rates, “It means to say we are realistic enough, I think, to know that the transmission mechanism would be affected,” he added.

On Wednesday, the Office for National Statistics reported that total business investment stood at -26.1 percent in the second quarter (year-to-year) after contracting by 31.3 percent in the previous quarter. In quarterly terms, it went down by -26.5 percent after dropping by 31.4 percent in the previous quarter.

Nationwide housing prices increased by 0.9 percent (month-to-month) in September, after being at 2 percent in August and over the analysts’ expectations, who foresaw it to be at 0.5 percent. In yearly terms, housing prices climbed by 5 percent, after advancing 3.7 percent in the previous month and over the 4.5 percent expected by the analysts.

The current account for the second quarter came at 2.8 billion pounds, below the analysts’ expectations who foresaw it to be at -0.4 billion, and after being at -20.814 billion pounds in the previous quarter. The Gross Domestic Product contracted by 19.8 percent in the second quarter (quarter-to-quarter), better than expected, and improving from the previous quarter’s 20.4 percent drop. In yearly terms, the Gross Domestic Product went down by 21.5 percent, after dropping by 21.7 percent in the previous quarter.

On Thursday, Markit Economics together with the Chartered Institute of Purchasing & Supply reported that the manufacturing sector expanded in September, announcing that the manufacturing PMI stood at 54.1, though slightly worse than August’s 54.3.

The Bank of England’s chief economist Andy Haldane highlighted that the economy has recovered faster than expected, saying that conditions for imposing negative rates have not been satisfied yet.

Last week, the pound sterling recovered against the US dollar, gaining 0.98 percent and closing Friday’s session at the 1.3040 level.

The pound sterling benefited from the optimism that took over the market regarding the post-Brexit talks. EU Brexit Negotiator, Michel Barnier said that a deal with the UK government is within reach, while a new round of negotiations were announced.

On Sunday, the Bank of England’s Governor, Andrew Bailey made a reference to the possibility of setting negative cash rates, though according to his comments the bank would only be willing to do so when the UK experiences an economic upturn.

“Our assessment of negative interest rates, from the experience elsewhere, is that they probably appear to work better in a more wholesale financial market context, and probably better in a nascent economic upturn,”  he said.

On Monday, the Bank of England’s Deputy Governor, Jon Cunliffe said that British hedge funds that rely on borrowed money to fund their financial activities should be scrutinized, given that they are a potential threat to financial stability.

On Wednesday the bank published the Consumer Price Index, which stood at 0.4 percent in September (month-to-month), after dropping 0.4 percent in the previous month and below the analysts’ expectations, who foresaw it to be at 0.5 percent. In yearly terms, the index stood at 0.5 percent, higher than the previous month’s 0.2 percent and remaining in line with the analysts’ expectations.

The Retail Price Index went up by 1.1 percent, below the analysts’ expectations who foresaw it to be at 1.2 percent and higher than the previous month’s 0.5 percent. The Producer Prices Index Core Output went up by 0.3 percent, after being at 0 percent in the previous month and over the analysts’ expectations, who foresaw it to be at 0.1 percent.

On Thursday, the Confederation of British Industry released the Industrial Trends Survey for October, which showed an improvement from September’s -48 percent, at -34 percent and way better than the analysts’ expectations, who foresaw it to be at -45 percent. Consumer confidence dropped to -31 in October, after being at -25 in September and worse than the analysts’ expectations, who foresaw it to be a -28.

The Bank of England’s  Chief Economist, Andy Haldane said during a conference at the National Institute of Economic and Social Research that the UK’s household spending is remarkably resilient, pointing out the US case and claiming that the UK could follow the same path.

On Friday, the Office for National Statistics published that Retail Sales went up by 4.7  percent, after climbing by 2.7 percent in August and way better than the analysts’ forecasts, who expected it to rise by 3.7 percent. In monthly terms, retail sales went up by 1.5 percent, after being at 0.9 percent in the previous month, and higher than the analysts’ expectations, who foresaw it to be at 0.4 percent.

IHS Markit reported that the preliminary Manufacturing PMI for October stood at 53.3, signaling a slower expansion of the sector compared to September’s, which stood at 54.1, and better the analysts’ expectations, who foresaw it to be at 53.1. The services PMI was at 52.3, below the analyst’s expectations, and showing a slower expansion of the sector, as the previous month’s figure stood at 54.

On Thursday, the Office for National Statistics reported that manufacturing production went up by 0.2 percent in September after being at 0.9 percent in August and rising less than analysts’ expectation of 1 percent. 

The pound sterling went up for the second consecutive week last week, climbing 0.23 percent against the US dollar and closing the week at the 1.3186 level.

This week has been a crucial one for the post-Brexit trade deal talks, though both sides have been unable to reach an agreement. Britain’s chief Brexit negotiator David Frost insisted that the UK is not changing its position in the coming trade talks, while it doesn’t seem that the EU is going to give up on its demands either. The Internal Market Bill remains a controversial talking point, as Ireland expects that the trade deal won’t be ratified if the UK decides to impose it.

“Even if we do get a new trade deal negotiated on both sides, if the British government is determined to continue with their Internal Market Bill to re-introduce parts of that bill that were removed by the House of Lords this week, then I think this is a deal that won’t be ratified by the EU,” said Ireland’s Foreign Minister Simon Coveney.

The Office for National Statistics reported that the unemployment rate for September, which stood at 4.8 percent, remained in line with the analysts’ expectations and exceeded the previous month’s 4.5 percent increase.

The Claimant Count Change shrank by 29.800, after going down by 40.200 in the previous month and below analysts’ expectations of 36.000. The Claimant Count Change rate was at 7.3 percent, after being at 7.4 percent in the previous month.

The British Retail Consortium published the like-for-like retail sales, which went up by 5.2 percent, lower than September’s 6.1 percent and below analysts’ expectations of 8.4 percent. Average earnings including bonus went up by 1.3 percent in September, after going up by 0.1 percent in August, and higher than analysts’ expectations of 1.1 percent. Average earnings excluding bonus climbed by 1.9 percent, after going up by 0.9 percent in the previous month and higher than analysts’ forecast of 1.5 percent.

On Thursday, the Office for National Statistics reported that manufacturing production went up by 0.2 percent in September after being at 0.9 percent in August and rising less than analysts’ expectation of 1 percent. In annual terms, it dropped by 7.9 percent after going down by 8.3 percent in the previous month and below analysts’ expectations of 7.4 percent.

Industrial production rose by 0.5 percent after increasing by 0.3 percent, less than analysts’ expectation of a 0.8 percent increase. The gross domestic product rose less than expected, at 15.5 percent (quarter-on-quarter) in the third quarter and after shrinking by 19.8 percent in the previous quarter. In annual terms, the gross domestic product went down more than expected, falling by 9.6 percent after dropping by 21.5 percent in the previous quarter.