Market Update

On Friday we saw the UK’s PMI data come out stronger than what traders were expecting, this has now reduced the chances of a Bank Of England interest rate cut on Thursday.

The Bank Of England’s meeting this week is going to be the main event the markets will have their eyes on, it is highly expected that the outlook will be dovish and if they do hint at an upcoming rate cut in the next few months this will weaken the pound slightly.

If we do see an interest rate cut it is believed that it will most likely be a “one and done” cut and not part of an easing cycle. In the case of a turnaround where there is no signs of an upcoming rate cut we should see Sterling gain as over the past few weeks a cut has started to be priced into it’s value.

On Wednesday over in the States it is the Federal Reserve’s interest rate decision, traders are not forecasting any changes to their policies and they will leave the upper bound interest rates at 1.75% and the lower bound at 1.50%. Trump stated that their GDP would be near 4% if it wasn’t for the Federal Reserve’s aggressive interest rate hikes over the past couple of years.

Last week was Christine Lagarde’s first interest rate meeting as the new President of the European Central Bank. As we expected she didn’t make any changes to their current monetary policy, we will have to see her stance over the next couple of meetings to gain a better understating of her outlook. Their monetary strategy review is expected to be concluded by the end of this year.

Overall this week is expected to be very volatile for Sterling as investors will be eagerly waiting for the Bank Of England’s interest rate decision and what forward guidance is given.

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