Bank of England boost Sterling

23 July, 2015

Rob Bastin

Wednesday’s trading kicked off with the Bank of England minutes from their interest rate decision earlier this month. Mark Carney has already spoken in recent weeks about the possibility of the first rate hike since the recession taking place sooner than previously forecast, as he continues to provide forward guidance to the markets. The latest minutes confirmed that no members voted for such a hike this month with a unanimous decision to hold rates at the record low of 0.5%. The minutes did however explain that the UK is ‘moving closer’ to an increase in rates and that the uncertainty surrounding the Greece situation played a part in the voting decision this month. Some members also saw risk of UK inflation rising above the 2% target in the medium term, lending towards a more hawkish mood in the short term. It is expected that we could see the first members voting for a hike as soon as next month however it is likely to take up to 6 months before a majority vote is achieved.

As usual the afternoon trading provided insight into the US economy as their day gets under way. Existing home sales saw a solid improvement but with house prices remaining flat. Although the dollar has weakened off in recent days, it remains in a strong position as the Federal Reserve also move closer to the first rate hike in the coming months.

Sterling continues to perform well but is fragile to short term losses with markets expecting a strong finish to the year. The Bank of England have also eluded to the negative impact of an over inflated pound and so data will need to keep impressing if current levels are to last. This morning we have the latest retail Sales figures for the UK at 9:30am and expectations are for improved growth of 4.9% annually compared to 4.6% posted last month. Canadian Retail Sales are also announced today at 1:30pm with Euro-zone Consumer Confidence released at 3pm.