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Traders await key Bank of England policy decision

Traders await key Bank of England policy decision

Yesterday we saw currency markets remain confined to tight ranges ahead of the conclusion of the Fed meeting. The result of the meeting was in-line with expectations and so the dollar felt little impact in the immediate aftermath.

As we get underway this morning EUR/USD opens around the upper half of $1.15-1.16, GBP/USD remains just above the midpoint of $1.36-1.37 and EUR/GBP continues stuck in the narrow 84.5-85p range we have seen of late. 

Today the much anticipated Bank of England monetary policy decision is to be announced. The key aspect for traders is the potential interest rate adjustment – the market is currently pricing in the possibility of a 15bps rate hike. 

Market watchers will also be focusing on any guidance regarding the potential for more rate hikes in the months ahead. The meeting holds significant two way risk for sterling. If the BoE strikes a more aggressive tone regarding the rates outlook, this could lift sterling higher. However, any divergence from the BoE away from the current market expectations for further rate hikes next year may have a significant negative impact on the currency.

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