Home Daily Commentaries Markets await Bank of England interest rate decision today

Markets await Bank of England interest rate decision today

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Thursday 9 May, 2024

Daily Currency Update

The Euro faces pressure against the Dollar as markets grapple with mixed economic data. ECB Chief Economist Philip Lane remarked yesterday that his confidence in inflation reaching the ECB's 2% target level has grown. Consequently, markets are now firmly anticipating the first ECB interest rate cut in June, expected to be by 25 basis points.

In the UK, the Monetary Policy Committee (MPC) is convening today to determine interest rate policy. The Pound has been trading weakly as inflation figures continue to decline. Deputy Governor of the Bank of England Dave Ramsden stated yesterday that he foresees inflation dropping to the targeted 2% level and persisting there for a while.

Meanwhile, the US Dollar is experiencing buying interest as markets anticipate the Federal Reserve to be the final central bank to reduce interest rates later this year. The committee holds diverse views; while some members advocate for maintaining higher rates for an extended period, others anticipate inflation to trend towards their 2% target rate. Consequently, they favour rate cuts, proactively addressing potential economic challenges rather than reacting after the fact.

Key Movers

The latest economic data from the Eurozone suggests that the service sector is displaying resilience while manufacturing and retail sales are facing more uncertain prospects. The European Central Bank (ECB) is scheduled to meet next on June 6th to determine interest rate policy. In the interim, markets will closely monitor economic indicators for confirmation of the anticipated 25 basis point rate cut this year.

The Bank of England will issue a statement tomorrow following their interest rate decision today. Market observers will scrutinize the forward guidance to discern whether UK policymakers abandon the rhetoric of "interest rates to remain sufficiently restrictive." Such a move would raise the likelihood of a rate cut by the Bank of England in June.

Next week, US inflation data will be released. Last week's disappointing job growth figures have fueled speculation that the Federal Reserve may enact two rate cuts this year, totalling 50 basis points. However, the president of the Federal Reserve Bank of Boston cautioned that significant cooling of the US economy would be necessary for inflation to return to the targeted 2%.

Expected Ranges

  • GBP/USD: 1.2440 - 1.2510 ▼
  • GBP/EUR: 1.1605 - 1.1650 ▼
  • GBP/AUD: 1.8940 - 1.9015 ▼
  • EUR/USD: 1.0696 - 1.0760 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.