While trade in the pound remained thin on Wednesday in the run up to today’s Bank of England (BoE) rate decision, it still saw some notable movement against the US dollar in the wake of the Federal Reserve’s policy meeting.
Meanwhile Sterling remains largely static this morning, with GBP/EUR flat at €1.1246, GBP/CAD subdued at C$1.7035, while GBP/AUD and GBP/NZD hold steady at to AU$1.7728 and NZ$1.9325 respectively, Only GBP/USD appears to be bucking this trend so far as it tumbles 0.4% to $1.3082.
Looking ahead, the pound could see some significant volatility today as the BoE is expected to deliver a long-awaited rate hike.
What’s been happening?
The pound continued to trade narrowly against its peers yesterday as the Bank of England’s upcoming rate decision left the currency paralyzed.
Not even the release of a weaker-than-expected Manufacturing PMI from the UK could faze Sterling on Wednesday as traders remained focused on the BoE.
With the bank widely expected to implement a rate hike following the conclusion of its August policy meeting, GBP investors were understandably reluctant to alter their positions in the currency.
The Eurozone also published its latest manufacturing PMI on Wednesday, with the bloc’s second worst reading in over a year pressuring the euro, allowing for the GBP/EUR exchange rate to rally.
Meanwhile after remaining static throughout most of Wednesday’s session, the GBP/USD exchange rate retreated overnight in the wake of the Federal Reserve’s latest policy meeting.
While the Fed made no alterations to monetary policy as a result of this month’s meeting, the dollar still roared higher thanks to the bank’s upbeat assessment of the US economy as well as its commitment to continue gradually raising interest rates.
What's coming up?
Movement in the currency markets today is likely to revolve around the pound as markets brace for a potential rate hike from the Bank of England.
While markets are likely to welcome the rate hike, there remains a good chance that today’s decision will in fact be negative for Sterling, with analysts expecting a ‘dovish’ hike which would see the rate rise as a one-off rather than the start of another cycle of monetary tightening.
The euro meanwhile is likely to be left at the mercy of markets today as a lull in Eurozone data keeps investors focused on the other majors today.
Finally the US dollar could tick higher later this afternoon, thanks to an expected upsurge in the latest US factory order figures.
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