Bank of England minutes today

19 February, 2014

Tom Arnold

Today is expected to be a very busy day on the markets with much data due out that is likely to have quite an impact on all of the major currency pairings.

In the UK we have two big releases – firstly the minutes from the Bank of England’s most recent policy meeting and secondly the UK’s latest unemployment number. The minutes will be interesting to see if there was any slight change in stance towards interest rate rises – although there is not much expectation of this following last week’s BoE inflation report, during which Mark Carney using his favoured “forward guidance” mechanism seemingly ruled out any rises in the short term while acknowledging that rises to approximately 2% were likely by 2017. Likewise unemployment as well as being a clear economic indicator in its own right has also been drawn into the interest rate debate recently, with initial indications from the BoE being a drop to 7% would trigger interest rate rises, being dampened by Mr Carney, following unemployment’s sharper than expected decline.

In short if interest rates rise or a clear sign is given that they are going to shortly then the Pound will strengthen. To some degree this is already priced in to the Pound’s current position following recent announcements, particularly the aforementioned inflation report, so the fear is that if the bank shy away from interest rate rises, or if the data pushes them away, e.g. a stall in unemployment’s decline, then the Pound could weaken significantly.

The US also sees a raft of data released today, with a selection of relatively low key housing and pricing numbers due out early this afternoon, before we hear from a couple of the FED’s members later on, ahead of the release of the minutes from the most recent FED policy meeting. Tapering of the US’ stimulus packages has been the recent US policy, but can this continue amid a backdrop of poor data releases and continued uncertainty over the US economy? The Dollar is very weak at present due to this trend of bad data, and continued tapering could be just what the doctor ordered to give the Greenback a boost, so watch this space if you have a Dollar purchase coming up.

There is little data due from the Eurozone, but in light of all of the data due in the UK and US, the Euro is still likely to be dragged along on the day’s rollercoaster ride.

With rates for buying the Euro still close to recent highs and against the Dollar still at the best rates for a number of years, it is well worth speaking to your CI account manager to discuss your options and particularly the possibility of a forward contract, which can book the rate now while it is high, even if you don’t need the funds for some time.