Pound Sterling has suffered more losses this morning against major currency pairs, as it now looks increasingly likely that an Interest Rate cut by the Bank of England will be implemented on Thursday. Bringing the policy rate down from 5.25% to 5%. Moving closer to this decision I wouldn’t expect too much volatility on the rates as it’s now pretty much priced in. More importantly however would be any forward guidance or hints towards another cut in September, then we would certainly see some more downward movement.
Elsewhere this week we have a basket of GDP data set to be released across Europe, with the all-important quarterly figures unfortunately showing a small decline across the bloc. This could in turn provide some short-term relief for GBP against the Euro, especially when taking into consideration Germany (who are Europe’s biggest economic contributor) also experiencing a slowdown.
Wednesday is the day of Interest Rates as we turn our attention to The Bank of Japan, and Federal Reserve in The U.S. Market sentiment right now seems to suggest a hold on current rates in Japan, however I wouldn’t rule out a rate hike after the recent currency intervention in The Japanese Yen as the central bank looks to prop up their currently undervalued currency. The Federal Reserve however are pretty much expected to hold their rates steady as their inflation seems to be dropping at a comfortable and steady rate. The key with both decisions will of course be the future guidance when deciding on further cuts or hikes, but any outcome which is unexpected may also see the markets react.
GBP/EUR 1.1818 GBP/USD 1.2805 GBP/AED 4.6984
GBP/AUD 1.9570 GBP/CHF 1.1331 GBP/CAD 1.7729
GBP/NZD 2.1703 EUR/USD 1.0823 GBP/ZAR 23.442