London RationalFX

RationalFX : Sterling falls ahead of Bank of England meeting

RationalFX : The pound fell on Wednesday ahead of today’s Bank of England meeting. Expectations of an interest rate cut have dropped recently but there still remains a 46% probability, meaning this vote is on a knife-edge……

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House price growth for January also adds weight to the argument that a cut would be premature, as it adds to signs that the economic confidence is continuing to improve since the general election. The unpredictability of this rate decision should mean we see some volatility in the immediate aftermath. Unsurprisingly, overnight gauges of market volatility surged to more than 15%, a high for this year.


The dollar continued to strengthen following the Federal Reserve Meeting, as Fed Chair Powell expressed concerns about the impact of the coronavirus and announced that interest rates would remain unchanged. A strong job market and continued moderate economic growth were seen as the main reasons behind no imminent need for an interest rate change.

Demand for the dollar has risen in recent weeks as investors remain concerned about the economic fallout from the outbreak, and have sought out safe haven assets. Last night’s comments are particularly interesting as it is the first time that Powell has made a definitive statement on it. The uncertainty of the whole situation is keeping Powell from being more positive on the economic outlook, especially since many uncertainties have recently negated.

Key Announcements

12:00 – GBP – Bank of England Interest Rate Decision; expected to remain at 0.75%.

12:00 – GBP – Bank of England Monetary Policy Summary and Release of Minutes.

12:30 – GBP – Bank of England Governor Carney Speech.

13:00 – EUR – German Harmonized Index of Consumer Prices (YoY) (Jan); expected to increase to 1.7% from 1.5%.

13:30 – USD – Annualized Gross Domestic Product (Q4); expected to remain at 2.1%.

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