BoE Considers Rate Hike; Fed Holds Steady

Sterling picked up after manufacturing surprised to the upside. GBPEUR inched to a new high since June. Focus today is on a possible BoE rate hike.

Previous Day's Market Highlights

The pound picked up yesterday after Manufacturing PMI surprised to the upside ahead of Thursday’s BoE meeting. Sterling eked out a new high against the euro, rising to its highest levels since late June. Sterling-dollar pulled back from morning highs around 1.3300.
 
As expected, the Fed kept interest rates on hold last night and signalled that the door remains open for a December rate hike. US data were mixed yesterday: ADPEmployment Change came in above forecasts at 235K, whilst ISM Manufacturing PMIdisappointed.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1392 1.1451 1.1069 3.34%
GBP / USD 1.3262 1.3339 1.3027 2.34%
EUR / USD 1.1641 1.1880 1.1574 2.58%
GBP/AUD 1.7190 1.7368 1.6675 3.99%
GBP / NZD 1.9164 1.9433 1.8367 5.49%
GBP / CAD 1.7021 1.7161 1.6350 4.73%

Today's Market Highlights

Expectations are high today for a possible rate hike from the Bank of England, which announces its latest decisions this afternoon (12:00 GMT) during a “Super Thursday” meeting that also sees the release of its quarterly Inflation Report. A hike has been largely priced in but could still see an additional move higher in the pound as a knee-jerk reaction.
 
However, should the Bank hold steady, market expectations would be disappointed, which would see the pound weaken. Key also will be the vote breakdown, the Bank’s updated inflation projections, and any signals regarding potential future hikes. These elements will provide greater context around the Bank’s decision and clues to the future direction of monetary policy.
 
This morning’s Construction PMI (09:30 GMT) typically has the most limited market impact of the three PMI releases and will likely be overshadowed by the BoE. Also expected today is President Trump’s nomination of the next Fed chair. It is widely expected that he will choose the dovish Powell.
 
Overnight, a pick-up in Australian Retail Sales could offer the Aussie support.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Markit Construction PMI (Oct) 48.0 48.1
12:00 GBP BoE Interest Rate Decision 0.50% 0.25%
12:00 GBP Monetary Policy Summary
12:00 GBP BoE Quarterly Inflation Report
12:00 GBP BoE Meeting Minutes
12:30 GBP BoE Governor Carney Speaks
12:30 USD Initial Jobless Claims (27 Oct) 235K 233K
12:30 USD Nonfarm Productivity (Q3) 2.4% 1.5%
16:20 USD Fed's Dudley Speaks
00:30 AUD Retail Sales s.a. MoM (Sep) 0.4% -0.6%