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Sterling slips ahead of Bank of England interest rate decision

GBP - British Pound

Today sees the first Bank of England interest rate decision of 2021 with no change in policy expected. The markets will however be focused on whether BoE Governor Andrew Bailey gives anymore insight into whether policymakers are toying with the idea of turning interest rates negative for the first time ever to try and stimulate an economy battered by the effects of Covid-19. Other countries have tried the policy in an effort to force more spending and lending with varied results however it seems Bailey and the rest of the BoE's Monetary Policy Committee will sit on their hands for a while longer. Last month the governor indicated that he wasn't considering pushing rates below zero which led to a sterling rally. That combined with the encouraging progress the UKs coronavirus vaccination programme is making could see a neutral if slightly hawkish stance from the bank however the pound is getting the jitters ahead of the midday announcement falling back against the dollar and the euro.

The aforementioned vaccination programme reached a notable milestone yesterday when UK Prime Minister Boris Johnson confirmed in a press conference at Downing Street that 10m jabs had now been administered in the UK. We have now vaccinated around 15% of the population and are on target to hit 15m jabs by Feb 15th which will hopefully cover the most vulnerable members of the community. The PM still is eyeing the 8th March as a date where he intends to reopen schools and more plans on the road map for reopening the wider economy are scheduled for later this month.

GBP/USD has slipped to 1.3580 with GBP/EUR at 1.1325

Key Movers

The eyes of the world’s forex traders have been drawn to EUR/USD this week as the supposed continued dollar weakness many were expecting this year fails to materialise and after making several failed attempts the world’s most traded currency pair has finally broken below 1.20 for the first time since December 1st. The US has injected around 10% of its population with a Covid vaccine and should Joe Biden meet his election pledge to vaccinate 100m people in his first 100 days then this could lead to a better than expected performance from the world’s largest economy for 2021. If you compare this with the sluggish vaccine rollout from the EU then it makes sense that some investors are reassessing their positions as so much attention is now on the pace of injections. Adding some more downward pressure this morning has been news that the German IFO Institute expects virus restrictions to last until mid-September which isn’t encouraging news for the EU's powerhouse.

Data yesterday from the US outperformed and many will now have turned their focus to tomorrows US jobs report. After falling in December analysts expect a return to job growth for January with the headline Non-Farm Payrolls predicted to show 62k for the month. No change in the unemployment rate of 6.7% is pencilled in.

There is another batch of low/mid-level data due out from the States at lunchtime including the weekly jobless claims reading which is expected to post >800k again.

EUR/USD has found support around the 1.1985 level with USD/JPY higher at 105.25.

Expected Ranges

GBP/USD: 1.3520 - 1.3680 ▼

GBP/EUR: 1.1260 - 1.1370 ▼

GBP/AUD: 1.7730 - 1.7910 ▼

GBP/NZD: 1.88 - 1.90 ▼

GBP/CAD: 1.7320 - 1.7485 ▼