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Sterling higher as Bank of England holds rates at 0.75%

GBP - British Pound

Sterling has jumped through yesterday and overnight trading, after the Bank of England (BoE) decided to hold interest rates at 0.75%. The call surprised most market analysts, with just over 50% pricing in an interest rate reduction, and has seen GBP/USD and GBP/EUR jump above 1.31 and 1.19 respectively.

A string of stronger data sets since the UK general election in December afforded the monetary policy committee a reprieve and enables them to hold onto some ammunition, should it need to revive the economy in the wake of Britain’s European divorce.

With today marking the UK’s official exit from the EU, it also starts the clock on an 11-month transition period, where Britain and the EU will attempt to reach a new trade agreement.

Looking ahead, investors will be keeping a close eye on UK data to see if the recent better than expected figures continue and subsequently lower the probability of rates being eased in May.

They will also be hoping a trade agreement can be reached quickly, providing markets with some much-needed certainty and further bolstering sterling.

Key Movers

Coronavirus concerns continued to dominate trading in the rest of the world. Thursday did also see the release of US advanced GDP numbers.

While the print came in as expected at 2.1% this indicated the US economy grew at its slowest annual pace in three years and falls short of both the White House and Federal Reserves targets.

Following the news EUR/USD saw itself pull away from the 1.10 handle and made a run towards 1.1040.

The Australian dollar depreciation continued through trade on Thursday as the coronavirus continues to dominate broader markets. The Australian economies exposure to China and the flow on effects to demand for Australian raw materials and domestic tourism will likely weigh further on Growth forecasts, hampering an already lacklustre expansion outlook.

In terms of data today, Europe posts CPI estimates and preliminary quarterly GDP numbers at 10am, while across the pond, US personal spending and Chicago Purchasing managers index are released and 1.30pm and 2.45pm respectively.

Expected Ranges

GBP/USD: 1.3080 - 1.3170 ▲

GBP/EUR: 1.1850 - 1.1950 ▲

GBP/AUD: 1.9575 - 1.97 ▲

GBP/NZD: 2.0260 - 2.04 ▲

GBP/CAD: 1.73 - 1.74 ▲