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Market excitement ahead of BoE meeting pushes GBP higher

Philip McHugh October 31st 2017 - 2 minute read

The pound was on strong form yesterday as markets eagerly eyed this week’s upcoming monetary policy decision from the Bank of England (BoE).

GBP/EUR is up to €1.1350 this morning, while GBP/USD is flat at US$1.3214. GBP/AUD has risen to A$1.7205, while GBP/NZD has climbed sharply to NZ$1.9288. GBP/CAD remains flat at C$1.6955.

Will anticipation of the Bank of England meeting this week continue to support the pound today? Read on to find out…

What’s been happening?

The pound was on strong form yesterday, as markets returned to betting the Bank of England would vote to hike interest rates during this week’s monetary policy meeting.

Although the long-term outlook for interest rates has softened, the potential for a hike to borrowing costs during this week’s ‘Super Thursday’ gave investors enough of a reason to buy Sterling.

Consumer credit data was also positive, in the sense that households were continuing to borrow – likely in order to fuel spending activity, which is a good sign for the UK economy. However, mortgage lending declined, in another blow to the already unsteady outlook for the property sector.

German retail sales and Eurozone business confidence survey results may have bettered forecasts, but the euro was nonetheless on the decline yesterday. German consumer price index figures disappointed, with the latest figures revealing that prices have stagnated on the month and year on year growth was lower than anticipated.

This does not bode well for the European Central Bank's newly tapered quantitative easing programme. The bank had signalled after tapering that it could easily extend or expand the scheme in future should the data prove unsupportive of tapering, so weakness here may not have raised confidence that the Governing Council is indeed heading for an exit from asset purchases.

The US dollar, meanwhile, is on strong form thanks to an upward revision to the latest personal consumption figures. These figures are the Federal Reserve’s preferred measure of inflation; strength here bodes well for the chances of a December interest rate hike. Markets will get more information on this from this week’s policy meeting.

What’s coming up?

The pound may find itself softened throughout the day by the slight fall in consumer confidence revealed by the early-morning release of October’s GfK confidence survey. However, excitement ahead of the week’s ‘Super Thursday’ from the Bank of England (BoE) could prop up GBP.

Eurozone unemployment, GDP and inflation data will be released this morning. Unsurprisingly, such a concentrated dose of high-impact news could upset GBP/EUR.

US consumer confidence data may help support the US dollar today, but with odds of a December interest rate hike from the Federal Reserve already at around 96%, USD is running out of room for upwards appreciation. This could work in GBP/USD’s favour.

Written by
Philip McHugh

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