The pound retreated on Thursday after the Bank of England (BoE) struck a more cautious tone than expected following its latest policy meeting.
Sterling appears to be consolidating these gains this morning, with GBP/EUR rangebound at €1.1020 and GBP/USD stable at $1.2975. GBP/CAD is flat at C$1.7305, while GBP/AUD and GBP/NZD are holding steady at AU$1.8034 and NZ$1.9421, respectively.
Coming up today, the spotlight looks to be on the Federal Reserve’s latest rate decision.
What’s been happening?The pound struck higher again through yesterday’s session, with GBP/USD propelled to a fresh four-month high, in spite of a souring market mood.
This upswing in Sterling sentiment is likely to have been helped by the Confederation of British Industry’s latest distributive trades index as the UK’s retail sales balance unexpectedly turned positive this month.
The US dollar was met by more selling on Tuesday, amidst uncertainty over US fiscal stimulus measures and a drop in US Treasury bond yields.
Political wrangling over the next US stimulus package proved to be particularly damaging for the US dollar as the Democrats and even President Trump criticised the Republicans’ $1 trillion proposal.
The euro, meanwhile, struggled for direction yesterday, with the single currency only able to avoid any notable losses thanks to lingering optimism over the EU’s stimulus plan.
What’s coming up?Looking ahead, the focus today will undoubtedly be on the Federal Reserve’s rate decision later this evening.
While no policy changes are expected from the Fed this month, the bank is likely to renew its commitment to accommodative policy as it seeks to support the US economy.
Economists suggest this may lead the Fed to signal a higher tolerance for inflation, something which is likely to weigh on the US dollar.
In the UK, a rebound in mortgage approvals last month may offer some limited support to the pound today, although lingering Brexit concerns are likely to limit the upside.
Finally, in the absence of any notable data, the euro will be left to the whims of market sentiment today, potentially rising later in the session if the US dollar continues to weaken.
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)