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All eyes on the BoE, how will the pound react to today’s rate decision?

currency-newsAll eyes on the BoE, how will the pound react to today’s rate decision?
The pound traded in a narrow range in the middle of the week as tensions between the UK and US over Huawei’s involvement in the UK’s 5G network spooked markets.
Sterling is on something of a downtrend this morning, with GBP/EUR drifting to €1.1780 and GBP/USD falling to $1.2984. GBP/CAD has edged up slightly to C$1.7160 but GBP/AUD and GBP/NZD are trading statically at AU$1.9304 and NZ$1.9968 respectively.
Centre stage today will be the Bank of England’s first rate decision of 2020, with an uncertain result likely to keep GBP investors on the edge of their seats.
What’s been happening?

The pound was mostly rangebound through Wednesday's trading session as markets expressed their concern over a growing row between the UK and US over Chinese tech giant Huawei.
In a visit to the UK, US Secretary of State Mike Pompeo urged the UK government to reconsider its recent decision to allow Huawei to be involved in the rollout of ‘non-core’ parts of Britain’s 5G infrastructure.
The US fears using Huawei tech could compromise UK intelligence, with Pompeo stressing the US needs to be sure it’s allies’ networks could be ‘trusted’.
The row weighed on Sterling sentiment as GBP investors fear the dispute could negatively impact a post-Brexit trade deal with the US.
The euro also traded flatly yesterday, with a surprise improvement in German consumer confidence only lending limited support to the single currency.
Meanwhile, the US dollar ticked slightly higher on Wednesday after the Federal Reserve concluded its latest policy meeting, keeping interest rates on hold and repeating its forward guidance from its December meeting.
What’s coming up?

Top of the agenda for today will be the Bank of England’s highly anticipated January rate decision.
There has been considerable speculation in recent weeks about whether or not the BoE could ease monetary policy this month, which now sees the odds of a rate cut today stand at about 50-50.
Such uncertainty could prompt notable movement in the pound today, with GBP exchange rates set to fall if the BoE ultimately opts for an immediate cut.
For USD investors the focus will be on the publication of the latest US GDP figures, which may offer some support to the US dollar if they confirm the US economy continued to expand at a healthy clip at the end of 2019.
Finally, in the Eurozone, the publication of the bloc’s latest business confidence figures may buoy the euro this morning if they show sentiment improved this month.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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