Potential BOE hike in Q4?
We are likely to see some movement in the Pound ahead of today’s Bank of England (BoE) meeting and the all important minutes, released shortly after the meeting. Whilst any change in interest rates is extremely unlikely, currently 0.75%, the market will be looking to see if other central banks dovish sentiments are to be reflected by the BoE. In this context, if the minutes are relatively neutral we could see a slight lift in the Pound versus other major currencies.
Yesterday’s Pound data releases were a mixed bag with no particular clear direction of travel. Again in the current context of political uncertainty, this was seen as a net positive for Pound and certainly contributed to the modest come back versus Dollar and Euro to pass 1.2700 and 1.1250 respectively.
Yesterday’s FOMC (Federal Open Market Committee) meeting kept US headline interest rates unchanged at 2.5%. Whilst there has been much commentary over a potential move to lower interest rates in the US (which would mean a weaker Dollar) recent global risk has kept the Dollar strong. Yesterday’s meeting did yield some clear pointers for US interest rate direction with overall consensus seeing a drop to 2.1% over 2020. This was a major contributor to the decline of the Dollar overnight.
The Euro was still unsettled by comments from European Central Bank’s (ECB) President Draghi on Tuesday, stating that the bank could cut interest rates again if inflation doesn’t reach its target. This, however, was before Charmian Powel gave his speech and pointed towards a more dovish Fed. After two days of dovish central banks, a case for a stronger Euro could be on the cards, as the Fed proves to be the more likely to take a stronger easing stance than the ECB. Paving a potential move up towards the 1.1300. Quiet on the calendar front today, with French and German PMI data being released tomorrow which could cause some movement if expected forecasts are missed.
Data to watch:
02:00 JPY BoJ Interest Rate Decision
02:00 JPY BoJ Monetary Policy Statement
02:35 AUD RBA’s Governor Lowe speech
04:30 JPY All Industry Activity Index (MoM) (Apr)
N/A JPY BoJ Press Conference
07:30 EUR ECB’s De Guindos speech
08:00 EUR Economic Bulletin
08:30 GBP Retail Sales (MoM) (May)
08:30 GBP Retail Sales (YoY) (May)
08:30 GBP Retail Sales ex-Fuel (YoY) (May)
08:30 GBP Retail Sales ex-Fuel (MoM) (May)
11:00 GBP BoE Asset Purchase Facility
11:00 GBP BoE Asset Rate Decision
11:00 GBP BoE MPC Vote Hike
11:00 GBP Bank of England Minutes
11:00 GBP BoE MPC Vote Unchanged
11:00 GBP BoE MPC Vote Cut
12:30 USD Continuing Jobless Claims (Jun 7)
12:30 USD Initial Jobless Claims (Jun 14)
12:30 USD Philadelphia Fed Manufacturing Survey (Jun)
20:00 GBP BoE’s Governor Carney speech
23:50 JPY National CPI Ex Food, Energy (YoY) (May)
23:50 JPY National CPI ex-Fresh Food (YoY) (May)
23:50 JPY National Consumer Price Index (YoY) (May)