Daily Currency Update

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All eyes on today's Bank of England Interest Rate Decision

GBP - British Pound

Sterling continued to be on the back foot through yesterday and overnight trading as investors remained cautious ahead of today’s Bank of England (BoE) Interest rate announcement and accompanying Monetary Policy statement.

Currently markets are pricing in a 50/50 chance that the BoE will cut rates later today and if this rings true both GBP/USD and GBP/EUR could break outside recent ranges, between 1.2950 and 1.3150.

As mentioned yesterday, a cut may come as a surprise to the other 50% of the market who are expecting a rate hold and therefore lead to a relatively large fall in sterling, maybe around the 1-2 cent range.

On the other hand, an unchanged rate decision will have some positive impact, but this will likely be muted given the fact that most analysts predict the BoE will cut rates at some point this year.

Key Movers

As expected, The Federal Reserve held interest rates overnight, highlighting sustained moderate economic growth and strength across the job’s/labour market as the drivers behind the unanimous policy decision. The statement was little changed from that issued after the December policy meeting and was widely expected across the broader market prompting little change across currency markets.

On the other side of the globe, the Australian dollar remained largely range-bound through trade on Wednesday, struggling to mount any significant upside momentum despite an uptick in consumer price pressures. December’s CPI inflation report showed a small annual uptick in the costs of both broad-based and core consumer products, jumping 1.8% and 1.6% respectively. While inflation remains below the RBA’s 2%-3% target the small uptick in prices eases the pressure on the Central Bank's policy setters to cut rates next month.

Looking ahead to today's docket, the main news is obviously the UK Bank of England interest rate announcement, at midday, but we will also see the release of German Preliminary CPI numbers as well as US Advance quarterly GDP figures.

Expected Ranges

GBP/USD: 1.2875 - 1.3150 ▼

GBP/EUR: 1.1680 - 1.19 ▼

GBP/AUD: 1.92 - 1.9425 ▼

GBP/NZD: 1.9875 - 2.0150 ▼

GBP/CAD: 1.71 - 1.7265 ▼