This morning has seen GBP continue to lose further ground against both The Euro & US Dollar in particular as we lead up to The Bank of England’s rate decision tomorrow. Current feelings within the market are pretty much in line with rates being unchanged, however what we anticipate might move the markets is whether the number of members voting for a cut will have increased from the solitary one member last time, or whether it’ll still be a minority in favour.
The reason this is important is mainly because if more members are now beginning to entertain the prospect of an interest rate cut then the markets will become jittery as a rate cut only leads to Foreign Exchange weakness. If on the contrary to this, either just the one member or none at all voted for a cut then it wouldn’t be a surprise to see Sterling recover some strength.
We round the week off keeping with UK economic data, with the latest release of UK GDP figures for March. Early indications show signs of another month of expansion, if this release were to be positive then it will have followed both January’s growth of 0.3% and February’s growth of 0.1% respectively. But more importantly this stronger and more optimistic start to the year will have done it’s best to pull The UK out of it’s mild ‘technical recession’ which it entered into in the second half of last year. Again, more promising signs for The Bank of England about the economic performance in The UK when discussing and contemplating interest rate cuts.
On the whole, it could be an up and down kind of week for GBP but right now GBP has been on a downward trend as we move into tomorrow’s decision.
We round the week off tomorrow with the eagerly anticipated Non-Farm Payroll data for The U.S, and as stated yesterday this data set will be scrutinised even more so now in line with inflation before any further decisions on Interest Rate Cuts. The one thing we do now however is that this data release in particular is the most volatile on the market and therefore it could be wise for any USD buyers to make a move before the release.
