Daily Currency Update

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Bank of England rate announcement today

GBP - British Pound

All eyes are on today's Bank of England rate announcement at 12 noon.

The UK's central bank has long been touted by some to have to increase interest rates shortly. It's more uncertain as to whether rates will be raised today, and the markets are pricing in a 60% chance of a 15 basis point (0.15%) rate rise today.

The Bank of England performed an 'emergency cut' during the first lockdown, and this would simply be a reversal of this. Longer term there still remains uncertainty around the UK's employment market and whether inflation is a transitory issue or not. Therefore, though Andrew Bailey appears to be certain that he wants to raise, there are other members of the BoE committee less sure about the move. If the hike doesn't happen today, there are opportunities to hike in both December and February, so sterling may initially fall but could then rise leading up to Christmas.

Key Movers

The worst kept secret in the market over the last few months has materialised. The Federal Reserve have stated that they will start tapering their asset purchase programme later this month. The taper will be $15 billion per month with a completion of the taper in mid-2022.

The Fed added that “substantial further progress in the economy has (been) made toward the Committee’s goals since last December.” Interestingly, they maintained that inflation was 'transitory'. This caused some volatility on the US dollar last night, weakening on the basis that transitory inflation may mean the US central bank may not tighten monetary policy as quickly as first thought. Interest rates were left unchanged.

Friday's non-farm payrolls will be watched closely for signs of a robust US economy. Economists expect a significant recovery in job growth during the month of October, however the last reading did disappoint the market after coming out significantly worse than expected. This month sees an expectation of 450k, but a disappointing reading here could see the US dollar weaken, suggesting that the Fed may have to slow down on their pace of tapering.

Expected Ranges

GBP/EUR: 1.1730 - 1.1840 ▲

GBP/USD: 1.3620 - 1.3680 ▼

EUR/USD: 1.1520 - 1.1570 ▼

GBP/AUD: 1.8280 - 1.8485 ▲