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BOE hints we could see more frequent rate rises

GBP - British Pound

Pound rallies were halted yesterday even after what could be perceived as a Hawkish rate statement from the BOE. As expected the central bank held rates at 0.75% with a 9-0 vote in favour of no change. The statement from Carney that followed the release seemed upbeat and in usual circumstances (without the Brexit black cloud) the Pound would have moved higher. The Governor did his best to convince investors by saying there could be a number of rate hikes and more than markets currently expect. Amongst all the positive comments there was an ‘if', and believe it or not this small word ultimately had a big impact in stalling the Pound's advances. Future rate rises were only justified if an orderly Brexit were to occur, reiterating previous comments. He added Brexit still determines the outlook for the UK. Its fair to say we probably won't see any change in policy this side of Brexit and there is only a 35% chance of one happening by the end of 2019 and only 1 hike until 2021.

On the release front, Construction PMI improved to 50.5, edging above the estimate of 50.4 but was largely overshadowed by the BOE announcement.

Cable was trading at day's high of 1.3080 prior to the midday announcement where we saw it drop to a low of 1.3020. Against the Euro ranges were a little tighter, within 30 points for most of the day. A high of 1.1670 down to 1.1637.

Final PMI for the UK today is from the services sector, due out at 9.30am, an uptick from the previous month's contraction has been forecast so could be positive for the Pound.

Key Movers

In the US, unemployment claims jumped to 230 thousand, well above the estimate of 220 thousand. The increase in the number didn’t do much damage with the Dollar still being supported off the back of the FOMC’s hawkish rate statement the previous day all but erasing the rate cut fear. All eyes now turn to the Non-farms release today.

Busy day for releases in the Eurozone. German and Eurozone manufacturing PMIs were within expectations, with readings of 44.4 and 47.9 respectively, the figure is the 2nd lowest since April 2013. German retail sales declined by 0.2% but better than the expected -0.5%. Whilst the readings don’t look great and still show contraction they do highlight a stronger figure from the previous month. Spain and France both posted 50 and above in their manufacturing release, highlighting expansion. EUR/USD couldn’t maintain the 1.12 handle and has fallen, this predominately down to a bullish Dollar.

Expected Ranges

GBP/USD: 1.2910 - 1.3080 ▼

GBP/EUR: 1.1650 - 1.1690 ▼

GBP/AUD: 1.8560 - 1.8660 ▼

GBP/CAD: 1.7400 - 1.7600 ▼

GBP/NZD: 1.9530 - 1.9730 ▲