BoE Expected to Hold

The BoE is in focus today. It is now expected to keep rates on hold and guidance will be key.

Previous Day's Market Highlights

The euro remained softer, enabling sterling-euro to make gains above 1.14 to its highest levels this month. Sterling-dollar regained 1.36 briefly before settling back into the 1.35-1.36 band. Euro-dollar held below 1.19 but recovered from a new year-to-date low hit earlier in the European session.
 
As was widely expected, the RBNZ kept interest rates on hold. The relatively cautious tone emphasised that interest rates need to remain “expansionary” for a “considerable period of time”, indicating it now doesn’t see a rate hike until Q3 2019. The RBNZ downgraded its economic growth and inflation forecasts. As a result, the kiwi fell, which saw sterling-kiwi break first 1.95 and then 1.96 in trading early Thursday morning.  

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1422 1.1600 1.1302 2.57%
GBP/USD 1.3561 1.4376 1.3484 6.20%
EUR/USD 1.1872 1.2414 1.1822 4.77%
GBP/AUD 1.8149 1.8478 1.7930 2.97%
GBP/NZD 1.9578 1.9755 1.9171 2.96%
GBP/CAD 1.7381 1.8039 1.7373 3.69%

Today's Market Highlights

Mixed production figures (09:30 BST) could have a dampening effect on the pound this morning, although the market impact may be relatively limited given the focus on the Bank of England’s upcoming interest rate decision (12:00). The BoE is now widely expected to keep interest rates on hold today after a spate of disappointing data and cautious central bank comments saw rate hike expectations plummet from 90% in April to under 20% in May. As it is a Super Thursday, the BoE will update its quarterly inflation report and Governor Carney will hold a press conference from 12:30.
 
The main questions are whether this is a hawkish or dovish hold and whether the Bank indicates that an August hike might be in play. Hawkish signals could come from upbeat economic growth projections, higher inflation projections, or additional dissent in favour of raising rates. Dovish signals would include concerns over the path of growth, lower inflation expectations, or a reversal by Saunders or McCafferty from their March call for a rate hike. Any disappointment of expectations could see the pound test new year-to-date lows against the dollar. If the Bank hikes, this would come a surprise to markets and see a knee-jerk move higher in the pound.
 
The US releases CPI figures, which could be dollar supportive, indicating a move higher in price pressures. Overnight, New Zealand releases its Business PMI and Australiareleases Home Loans data.  

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Manufacturing Production MoM (Mar) -0.2% -0.2%
09:30 GBP Manufacturing Production YoY (Mar) 2.9% 2.5%
09:30 GBP Industrial Production MoM (Mar) 0.2% 0.1%
09:30 GBP Industrial Production YoY (Mar) 3.1% 2.2%
09:30 GBP Total Trade Balance (Mar) £-2.000B £-0.965B
12:00 GBP BoE Interest Rate Decision 0.5% 0.5%
12:00 GBP Monetary Policy Summary, Minutes, Inflation Report
12:30 GBP BoE Governor Carney Speaks
13:30 USD CPI YoY (Apr) 2.5% 2.4%
13:30 USD Core CPI YoY (Apr) 2.2% 2.1%
19:00 USD Monthly Budget Statement (Apr) $193.75B $-209.00B
23:30 NZD Business NZ PMI (Apr) 52.2
02:30 AUD Home Loans (Mar) 0.1% -0.2%

Caxton