Bank of England minutes highlight of the day

22 April, 2015

Tom Arnold

As we reach the middle of the week, we find the Pound performing relatively well despite fears of upheaval caused by the upcoming election. The markets do not yet seem to have really started pricing the potential calamitous nature of a hung parliament, with possible Labour/SNP deal, in yet, so the Pound is instead being supported by positive data and aided by negativity elsewhere.

In Europe, the Greek debt problem is still weighing very heavily on the Euro, with no positive steps coming from the negotiations at all, things look destined to get right down to the upcoming payment deadlines, with default very much still on the cards. As a result the Euro has been performing badly again in recent days. There was a slight positive move yesterday when the ECB announced they will continue to fund the Greek banks as long as they remain solvent, and the Euro did manage to pull back some losses, including half a cent or so against Sterling.

In the US, we had a couple of weaker data releases last week which have halted the Dollar’s recent rise, and coupled with the Euro gaining yesterday, has seen the Dollar buying rate push back up again. This is likely to be a short term gain for the Pound, as talk of US interest rate rises as soon as June will inevitably give the Dollar another shot in the arm.

The only data of any note today; sees the release of the Bank of England’s minutes from this month’s policy statement meeting. The expectation is that the hold in policy came as a result of a 9-0 vote. Any variation on this could cause some movement, especially if any of the MPC members did vote for interest rate hike, as this would lean towards a view we might see hikes sooner than the anticipated next year.

So the Pound is doing well, but is waiting for the spectre of the election uncertainty to kick in, which must surely happen in the next few days as we get close to polling day. Many of our clients are taking advantage of this situation to book their rate now for their upcoming currency purchase on a forward contract – ask your CI account manager today how you could do the same.