RationalFX: Sterling traded close to month highs against the euro and dollar on Wednesday with the British currency seemingly benefitting from the UK’s improving Covid situation.
Anticipation the Bank of England (BoE) may become more hawkish in today’s meeting may also have had an impact.
29,312 new Covid cases were announced yesterday, taking the number of confirmed cases between the 29th July and 4th August to 184,308, a decrease of 13.7% from the week before. The good news coincided with news that first Covid jabs would now be extended to all 16 and 17 year olds.
Investors will be paying close attention to the Bank of England rate decision today which will also see the bank publish new forecasts. Approaching today’s decision, sterling appears to be trading on the front foot with investors placing bets the BoE will be one of the first main central banks to normalise monetary policy to combat rising inflation. This will involve trimming its bond-buying programme and ultimately looking to raise interest rates to pre-pandemic levels in 2022.
Recent comments from policymakers Michael Saunders and Dave Ramsden have helped fuel optimism for a hawkish turn by the BoE. Both have called for the bank to act to curb rising inflation, whilst other member have cautioned it’s too early to think about adjusting policy.
The euro struggled to gain on its peers during Wednesday trade following a mixed bag of retail data.
According to Eurostat, retail sales in June missed expectations of 1.7% growth to show 1.5%. This is despite European countries enjoying an uptick in sales as lockdown restrictions eased across the continent. Whilst the month-on-month figure missed expectations, the year on year figure surpassed expectations to read 5% growth against expectations of 4.5%.
12:00 – GBP- Bank of England interest rate decision
12:00 – GBP – Bank of England monetary policy report
Source : ETFWorld.co.uk