- Posted by currencies in Bank of England, coronavirus, Dollar, Economy, EUR, Fed, GBP, Prime Minister, Sterling, UK, Uncategorised
- June 24, 2021
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Today the main focus for GBP is the Bank of England Interest Rate decision. The expectation is expected to see rates kept at their current levels along with existing Quantitive Easing measures to continue for the foreseeable, however it has been stated that The Bank of England will be keeping an eye on inflation which crept above its 2% target in May. Although inflation rises is expected to be temporary, concerns around a surge in unemployment from 1st July once employers will be asked to contribute to the cost of keeping workers on furlough is weighing down on the Bank of England for future movements with rates.
Current expectation for rate hikes in The UK are set to see the first hike in 2022, at the earliest of May 2022 depending on how the unemployment picture looks like from September when the furlough scheme comes to a complete stop. Vaccination rates and case numbers in The UK will also have an impact on any rate hike especially after the ‘Freedom Day’ of 21st June was delayed by a month, to allow more of the younger generation to get protection against the virus.
The USD edged slightly higher early this morning off the back of more diverse opinions from several Federal Reserve policy makers. Last week we saw 8 out of 11 voting members vote for 2 rate hikes in 2023 which was the main catalyst for the rise in USD strength across the majority of currencies. However there seems to be further confidence that The U.S. can raise interest rates sooner rather than later with Fed Reserve Dallas President Kaplan projecting a rate hike in 2022 as the view is The U.S. will recover from the pandemic quicker than people think and coupled with inflation remaining above the 2% target and unemployment eventually dropping below 4%. Although at this present time there isn’t any indication for a rate hike in 2022, seven of the eighteen members had pencilled in a rate hike for next year.