GBP starts week strong against EUR
Huge week ahead with 5 central bank rate decisions:
- Tuesday – Reserve Bank of Australia (RBA) – Australia – Expected to remain at 2.5%
- Wednesday – Bank of Canada (BoC) – Canada – Expected to remain at 1%
- Thursday – Bank of Japan (BoJ) – Japan – Expected to remain at 0.1%
- Thursday – Bank of England (BoE) – UK – Expected to remain at 0.5%
- Thursday – European Central Bank – EU – Expected to remain at 0.5%
The British Pound struggled to hold its ground during the final days of August, with GBPUSD seeing a weekly low of 1.5426. But should the Central Bank highlight an improved outlook for the U.K. economy at the Bank of England interest rate decision this Thursday, we may see GBP maintain its upward trend dating back to July. Indeed, the BoE is widely expected to keep the benchmark interest rate at 0.50% while maintaining its asset-purchase program at GBP 375B, and we may see the Monetary Policy Committee refrain from releasing a policy statement should they vote unanimously to retain its current policy.
It seems as though Governor Mark Carney is becoming upbeat on the economy as he sees a more broad-based recovery in the U.K. As such he may show a greater willingness to retain the wait-and-see approach for an extended period of time as the MPC continues to operate under its inflation-targeting framework. Another 9-0 vote should help to shore up GBPUSD as it dampens the scope of seeing a further expansion in the BoE’s balance sheet. We may see a growing number of central bank officials scale back their dovish tone as growth and inflation picks up.
This morning a raft of Eurozone data sees EUR on the back foot with GBP/EUR making its way towards 1.1770.
On Friday critical US Nonfarm Payrolls report could determine Dollar trends through to year-end.
For a more detailed outlook for the week, why not check out our weekly video updates here.