Pound Sterling exchange rate rises, BoE rate decision in focus

The pound ticked higher against the majority of its peers yesterday as they suffered due to lacklustre economic data or on political concerns. 

Sterling appears to be holding steady this morning, with GBP/EUR flat at €1.1432, GBP/USD unmoved at $1.3563 and GBP/NZD stabilising at NZ$1.9560. However GBP/CAD and GBP/AUD are faring a little worse today, having fallen to C$1.7332 and AU$1.8121 respectively.

The Bank of England (BoE) will deliver its latest rate decision this afternoon, with the pound expected to see significant movement, whatever the outcome…

What’s been happening?

The pound advanced on Wednesday, with GBP appearing to be granted some respite ahead of the BoE’s rate decision later today,

However Sterling’s gains yesterday were slightly dented by the release of a gloomy retail report from the British Retail Consortium (BRC), which suggested British retailers suffered a sharp drop in business last month.

The GBP/EUR exchange rate extended its rally on Wednesday as investors expressed increasing concerns over the political situation in Italy as the country looks set for a second general election this summer, fuelling further political uncertainty in the Eurozone’s third-largest economy.

Meanwhile the recent down trend in the GBP/USD exchange rate appeared to come to an end yesterday as the US dollar was pressured by a weaker-than-expected producer price index.

The index revealed wholesale inflation slowed from 0.3% to 0.1% last month, denting market confidence in the Federal Reserve’s more upbeat inflation expectations.

What’s coming up?

Markets are bracing for some considerable movement in the pound today as the Bank of England concludes its latest policy meeting this afternoon.

While a run of soft UK economic data appears to have erased all chances of the BoE voting to raise interest rates this month, there is still the potential for Sterling to advance if policymakers indicate that a rate hike may still be on the table.

Conversely the pound could be met by heavy losses if the bank appears reluctant to commit to any additional monetary tightening this year.

Meanwhile the US dollar could soar later this afternoon if US inflation is revealed to have risen as forecast last month, although doubts are likely to linger following yesterday’s softer-than-expected PPI figures.

Finally with a data calendar devoid of any notable releases today the euro may find that it struggles to find any traction in currency markets, especially if Italy’s political concerns remain in the spotlight.