Markets Await Bank Of England Release

By Simon Eastman

Friday we saw a strong end to the week’s trade for the pound, gaining against most major currencies.

Despite better non-farm payrolls figures, the pound managed to rally back against the dollar ending up a cent better off, whilst the rates for buying euros also rallied to some of the best levels we have seen this year.

Traders are betting on what the Bank of England will do next, with the next decision coming in a couple of days’ time. Some banks, like HSBC and Citigroup, feel the rate cycle the Bank has planned is over priced into the markets already, whilst others, while inflation still remains an issue, feel we may see further hikes after this meeting, unlike the Fed’s indication recently. According to market predictions, it’s now seen that UK interest rates will surpass the US by the end of this year, and remain that way for some time, which hasn’t been the case since the Brexit referendum. A 0.25% hike this week is expected, followed by one or possibly two more 0.25% hikes over the rest of the year, leaving interest rates at 5 percent.

This theory is what has driven sterling up so any deviation come Thursday when the Bank releases their statement and hold the subsequent press conference, could well cause some upset for the pound, so anyone with a purchase to make using the pound might be prudent to consider locking something in ahead of Thursday’s release.

The UK is now back to work following the weekend of Coronation celebrations as we saw King Charles III crowned in a spectacular ceremony on Saturday, followed by two days of further celebration as Brits held street parties and celebrated with the Royals at the Coronation Concert at Windsor Castle.

Now we open back up we have a few releases this week to note, alongside the all important BoE interest rate decision on Thursday, including:

Tuesday: speeches from eCB members, Lane and Schnabel, plus AUD budget release.

Wednesday: US inflation and monthly budget report.

Thursday: UK Bank of England interest rate release, policy statement and press conference by Chief Andrew Bailey.

Friday: UK GDP pus industrial and manufacturing production figure, BoE and ECB member speeches and the US consumer sentiment report.

A handful of releases but key ones, especially for the UK and the Pound, so make sure to keep in touch with the team at A Place in the Sun Currency throughout the week for all your friendly guidance.