Sterling Awaits BoE Super Thursday

Sterling-euro again held below 1.1200 while sterling-dollar held above 1.3200 and euro-dollar rose to a new high above 1.1900 later in the day. Sterling-dollar is trading at its highest levels since mid-September. It saw a September high of 1.3446. The dollar has been under pressure on Trump’s political drama and the potential implications of slower inflation for Fed rate hikes.

Previous Day's Market Highlights

Sterling-euro again held below 1.1200 while sterling-dollar held above 1.3200 and euro-dollar rose to a new high above 1.1900 later in the day. Sterling-dollar is trading at its highest levels since mid-September. It saw a September high of 1.3446. The dollar has been under pressure on Trump’s political drama and the potential implications of slower inflation for Fed rate hikes.
 
A greater-than-expected slowdown in Construction PMI briefly weighed on the pound. Gains in the Eurozone’s Producer Price Index had little impact on the euro as PPI still declined month-on-month.
 
US ADP Employment Change fell shy of forecasts, which may weigh slightly on expectations for Friday’s NonFarm Payrolls figure.
 
The Aussie softened overnight in part due to under-forecast trade data. 
Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1164 1.1438 1.1117 2.81%
GBP / USD 1.3232 1.3251 1.2812 3.31%
EUR / USD 1.1851 1.1912 1.1330 4.89%
GBP/AUD 1.6690 1.7107 1.6269 4.90%
GBP / NZD 1.7880 1.7994 1.7398 3.31%
GBP / CAD 1.6667 1.6856 1.6238 3.67%

Today's Market Highlights

The UK releases Services PMI for the month of July this morning (09:30 BST). A pickup in the sector, which represents over 70% of the UK’s economy, could offer the pound some support, although attention will primarily be on the upcoming Bank of England interest rate decision.
 
The Bank of England will likely keep interest rates on hold given slower wage growth and modest economic growth. While inflation will likely remain well above the Bank’s 2% target rate, it did slow unexpectedly to 2.6% in June. Additionally, the Bank may tread particularly carefully during a time of heightened uncertainty.
 
The greater risk for the pound may therefore be to the downside. If the Bank strikes a relatively cautious tone, the pound may weaken. June’s 5-3 split will likely fall to 6-2 given MPC Member Forbes’ subsequent departure.
 
However, should the Bank strike a more hawkish tone than expected, additional members join McCafferty and Saunders in favouring a hike, or the Bank unexpectedly raise interest rates, the pound could instead rally. Either way, volatility should be expected.
 
In the afternoon, the US releases Initial Jobless Claims (13:30 BST) and Services PMI(14:45, 15:00 BST). 

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Services PMI (Jul) 53.6 53.4
11:00 EUR Retail Sales YoY (Jun) 2.6% 2.6%
11:00 EUR Retail Sales MoM (Jun) 0.1% 0.4%
12:00 GBP BoE Interest Rate Decision 0.25% 0.25%
12:00 GBP MPC Votes 2-0-6 3-0-5
12:00 GBP Monetary Policy Summary & Minutes
12:00 GBP Quarterly Inflation Report
12:30 GBP BoE Governor Carney Speaks
13:30 USD Initial Jobless Claims 242K 244K
14:45 USD Markit Services PMI (Jul) 54.2 54.2
15:00 USD ISM Non-Manufacturing PMI (Jul) 57.0 57.4
22:45 NZD Unemployment Rate (Q2) 4.8% 4.9%
15:00 USD Factory Orders MoM (Jun) 2.8% -0.8%
02:30 AUD Retail Sales s.a. MoM (Jun) 0.2% 0.6%
02:30 AUD RBA Monetary Policy Statement