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All eyes on “Super Thursday”

• Posted by Shyam Gokani in Bank of England, Brexit, Currency, Dollar, Economy, EUR, GBP, Mark Carney, Sterling, UK
• May 12, 2016
• No Comments

The focus in Europe will be today “Super Thursday” as investors prepare for the Bank of England’s monetary policy decision, its minutes, the quarterly Inflation Report and a press conference from Governor Mark Carney.

Brexit is dominating the U.K. agenda and the Bank of England is set to update its take on how the vote is affecting the economy on Thursday.

With just six weeks to go until Britain’s referendum on its European Union membership, rate setters led by Governor Mark Carney have already warned uncertainty may be weighing on growth. That’s started to show up in the numbers and while all economists in a survey predict the key rate will be kept at 0.5 percent, Bank of America Merrill Lynch say one or two of the nine-member panel may vote for a cut.

Brexit jitters are taking a toll on demand as its gauge of services, the biggest part of the economy, fell to its lowest level in more than three years in April. Manufacturing and industrial production statistics fell short of expectations in March and trade is dragging on growth. Even retail sales — key to an economy driven by spending — recorded their steepest decline since 2008.

The pre-vote nerves are manifesting themselves in the pound. A gauge of hedging for sterling losses versus the dollar climbed to the highest since 2003. While sterling has recovered from the seven-year low against greenback that it reached in February, it’s still the worst-performing Group-of-10 currency in 2016.

The risk of a vote to leave the EU has helped push up investor bets for a rate cut before the end of the year. While policy makers said last month they would interpret data in the run-up to the referendum with caution, traders are pricing in a 40 percent probability of lower rates by the end of 2016.

The Bank of England decisions are due today at 1200 GMT

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