Sterling Awaits BoE

Sterling fell back from recent highs as wage growth disappointed. Cable lost further ground as the dollar gained on discussions of the US tax plan, details of which may come later this month. Sterling-dollar fell towards 1.3200, down from one-year highs above 1.3300. Euro-dollar fell below 1.1900 for the first time in just over a week.

Previous Day's Market Highlights

Sterling fell back from recent highs as wage growth disappointed. Cable lost further ground as the dollar gained on discussions of the US tax plan, details of which may come later this month. Sterling-dollar fell towards 1.3200, down from one-year highs above 1.3300. Euro-dollar fell below 1.1900 for the first time in just over a week.
 
Sterling fared better against the euro, regaining 1.1100 after a dip on the UK data, whilst dollar pressure limited the euro’s gains.
 
The Aussie jumped overnight as employment data surprised to the upside. Employment Change and the participation rate both rose. The Aussie jumped around a cent against the pound, pushing the rate back below 1.6500. 
Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1116 1.1134 1.0745 3.49%
GBP / USD 1.3211 1.3329 1.2777 4.14%
EUR / USD 1.1884 1.2093 1.1662 3.56%
GBP/AUD 1.6521 1.6602 1.6165 2.63%
GBP / NZD 1.8260 1.8315 1.7522 4.33%
GBP / CAD 1.6098 1.6237 1.5837 2.46%

Today's Market Highlights

The highlight today is the Bank of England meeting (12:00 BST). Hawkish expectations rose following Tuesday’s acceleration in inflation, but fell back yesterday as wage growth did not in turn pick up pace. High inflation has been weighing on real wages, one of the factors leading investors to expect the Bank of England to keep policy on hold today.
 
Key therefore will likely be the votes. Last month, MPC Members Saunders and McCafferty held their calls for a rate hike. A 7-2 breakdown in favour of holding rates is expected today; any deviation from that vote would therefore see volatility.
 
Sterling could rally if a third member dissents, but the greater risk may be to the downside with the Bank likely to continue looking through the inflation overshoot for the time being.
 
In the afternoon, investors will closely watch the latest CPI data from the US (13:30 BST). Softer inflation has weighed on Fed rate hike expectations, one of the reasons the dollar has been on the backfoot lately. An acceleration could therefore provide the dollar with support, alleviating some concerns, whilst a further dip would likely renew pressure on the dollar. 

Today's Economic Calendar

Time Currency Release Consensus Previous
12:00 GBP BoE Interest Rate Decision 0.25% 0.25%
12:00 GBP MPC Vote 2-0-7 2-0-7
12:00 GBP BoE Minutes
12:00 GBP Monetary Policy Summary
13:30 USD Initial Jobless Claims (8 Sep) 300K 298K
13:30 USD CPI YoY (Aug) 1.8% 1.7%
13:30 USD Core CPI YoY (Aug) 1.6% 1.7%