Interest rate decisions as expected – stable exchange rates

8 August, 2014

Rob Bastin

Thursday’s trading saw both the UK and the Euro-zone come into focus with their monthly interest decisions both to be announced at lunch time. The markets were flat in the morning in anticipation of the 2 decisions and the results did little to Sterling and Euro exchange rates as each bank met expectations. The Bank of England held interest rates at the record low of 0.5% and held their asset purchase programme at the £375B level. It is rumoured that one or two members of the MPC may have voted for a rate hike but we will not find this out for another 2 weeks when the minutes are released. Even if this is the case we are still some way from a majority vote that would trigger the first hike, likely to occur in the first quarter on 2015.

The ECB equally held their base rate at 0.15% with rate hikes not even in discussion with the Euro-zones current economic situation. As ever the markets were listening on Mario Draghi’s every word in the press conference that followed for an insight into developments within the Euro-zone economy. The Euro took a small dip off the back of Draghi’s comments that the current interest rates are ‘consistent with their assessment of a moderate and uneven recovery’. Draghi also reiterated that the ECB are still prepared to use unconventional methods to curb and control inflations concerns within the Euro-zone. On the whole it was more of the same from both decisions with no surprises and so GBP/EUR exchange rates remained unchanged close to the yearly high.

We finish the week off with the UK and Canada in focus on the economic calendar. Total/Goods Trade Balance figures for the UK will be released at 9:30am with Canada’s unemployment rate to be announced this afternoon at 1:30pm.