Penultimate trading day ahead of BoE decision

1 August, 2018

Paul Newfield

Yesterday saw GBP-EUR remain stable, despite major EU data coming in below expectation. At 10 am EU GDP came in at a decline of 0.1% for both the quarter and for the year. This was however tempered by CPI inflation that was actually better than expected. Across the pond saw US data in the form of personal spending, expenditure, income and employment cost, which came in as a bit of a mixture of results although none were seen as positive. GBP-USD saw a half-cent drop over the course of the trading day.

There has been some positive UK data this morning, with Nationwide house prices up 0.6% and 0.4% for the YoY and MoM respectively. First thing this morning between 8:15am and 9:30am we have a multitude of Markit Manufacturing PMI from France, Germany, Italy, Spain and the UK; this afternoon at 14:30 and 14:45, the same data releases from Canada and the USA will also be published, along with ISM prices and manufacturing at 15:00. After trading hours at 19:00 there is the Fed’s monetary policy statement and interest rate decision, with no change predicted – a major player in not only the weakening GBP-USD rates but may also affect GBP-Eur rates tomorrow, if the unforeseen does happen and the rate does indeed change.

Which brings us to Thursday and the all-important BoE interest rate decision at 12pm – a rate hike is expected, although much of what positivity there is has already been priced into the market with investors expected to sell off the pound very quickly if the hike doesn’t happen, bring sterling crashing down, possibly to the lowest levels seen since last year. According to NIESR, the Bank of England, if a hike does indeed happen, should “tell the public it will be ready to make a U-turn if Brexit talks sour or trade tensions with the United States escalate”. Not the most inspiring statement, clearly indicating the pound is very much in a perilous state. Keep in touch with us to ensure you aren’t caught out by sudden negative exchange rate volatility.