By Matthew Vassallo
The Pound continued to find plenty of support throughout last week’s trading, with investors’ risk appetite for GBP seemingly buoyed by the assumption of second consecutive interest rate hike, when the Bank of England convene on Thursday for first monetary policy meeting of 2022.
With financial analysts almost universally in agreement that Thursday will bring with it the first back-to-back rate hike by the BoE since 2004, the foundations for GBP’s recent upward progression are likely tied into this prediction. As such, the markets will have at least to some extent priced in the highly anticipated rate hike to 0.5%, which is required due to provide some measure of economic stability for the UK economy, following the sharp rise in the inflation rate, to its now decade high of 5.4%.
Of course, any deviation from the widely predicted outcome of Thursday’s decision could have a significant impact on GBP’s value, which would almost certainly be exposed to some type of negative retraction due to the pricing in of the expected result to its current value.
Whilst unlikely it’s is still worth considering for those clients holding GBP positions, although what may be more relevant to them and any prospective significant change to their positions, is the BoE’s monetary policy statement following the rate decision.
In this, members of the BoE will outline the central bank’s current monetary policy stance, whilst giving indications of potential future rate hikes in line with the current economic conditions.
With an anticipation that the BoE may also embark on Quantitative Tightening, which would be the first time they have ever embarked on this strategy, there is the potential for further highs to be reached on GBP/EUR in the short-term. Whilst this brings with it the potential of new riches, the current economic undertone of uncertainty and ongoing concern over rising inflation and the negative impact of Omicron, heads as constant reminder of the other side of the coin.
Below is an overview of the key economic releases this week.
Monday
Eurozone GDP figures
Tuesday
Eurozone Markit Manufacturing PMI data
Eurozone Unemployment figures
US Markit Manufacturing PMI figures
Chinese New Year
Wednesday
Eurozone Consumer Price Index
Thursday
Eurozone Services PMI figures
**BoE Interest Rate Decision & Monetary Policy Statement**