BoE Super Thursday to Drive Markets

The dollar gained yesterday. Attention today turns to the BoE.

Previous Day's Market Highlights

The dollar gained further ground against both the pound and the euro yesterday as it corrected previous losses. Sterling-dollar fell back below 1.39 and euro-dollar below 1.23. Against the euro, sterling picked up towards 1.13, its highest levels since Monday.
 
The data calendar was fairly light, leaving attention largely on New Zealand’s monetary policy decision. The RBNZ kept interest rates on hold at 1.75% as was widely expected. The kiwi fell on the bank’s neutral stance; Assistant Governor McDermott said the next move could be either an increase or a cut should there be a significant shift in inflation expectations, and that core inflation is still low. Sterling-kiwi hit 1.93 in overnight trading.
 
Equities were less volatile yesterday but still saw relatively wide swings compared to those seen recently. Germany has provisionally reached a coalition deal, pending approval from the SPD, but the euro impact was limited.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1314 1.1512 1.1197 2.72%
GBP/USD 1.3881 1.4346 1.3458 6.19%
EUR/USD 1.2267 1.2538 1.1929 4.86%
GBP/AUD 1.7723 1.7861 1.7098 4.27%
GBP/NZD 1.9261 1.9466 1.8613 4.38%
GBP/CAD 1.7458 1.7646 1.6911 4.17%

Today's Market Highlights

The main event today is the Bank of England’s first meeting of the year (12:00 GMT), a “Super Thursday” event including the Bank’s quarterly Inflation Report. While the MPC is expected to keep interest rates on hold at 0.5%, the latest revisions to the BoE’s GDP and inflation projections will be key for rate hike expectations.
 
If the Bank is upbeat, raising its growth projections and signalling a hike remains on the table, or if there is any dissent from the expected 9-0 vote to hold, the pound could strengthen. However, any potential upside may be limited as the Bank has said that any future hikes would occur “at a gradual pace and to a limited extent” and will likely reiterate this today. BoE Governor Carney will hold a press conference from 12:30 GMT.
 
Fed speakers include Harker, whose speech this afternoon (13:00 GMT) is titled “The Economy: Outlook and Impact for Colleges and Universities”, and Kashkari, who is to participate in a Town Hall in South Dakota (14:00 GMT). Both events include a Q&A. Investors will closely interpret the comments for any monetary policy clues. US data are mostly mid-level.
 
After the European close, BoC Governing Council Member Wilkins is to speak on innovation and inclusive growth at the G7 Symposium (17:45 GMT).

Today's Economic Calendar

Time Currency Release Consensus Previous
09:50 USD Fed's Kaplan Speaks
12:00 GBP BoE Interest Rate Decision 0.5% 0.5%
12:00 GBP MPC Vote 0-0-9 0-0-9
12:00 GBP BoE Inflation Report
12:00 GBP Monetary Policy Summary & Minutes
12:30 GBP BoE Governor Carney Speaks
13:00 USD Fed's Harker Speaks
13:15 CAD Housing Starts s.a. YoY (Jan) 210K 217K
13:30 USD Initial Jobless Claims (2 Feb) 232K 230K
14:00 USD Fed's Kashkari Speaks
17:45 CAD BoC Wilkins Speaks
00:30 AUD RBA Monetary Policy Statement

Caxton