Sterling had a strong day – will the Bank of England’s announcement today affect this?

A good day for the sterling markets yesterday saw some surprise strength for the currency against a number of its trading partners. The Purchasing Managers’ Index (PMI) figure from the services industry showed the first month-on-month contraction since January 2013. Despite this disappointing data, sterling managed to erase some of the recent losses against the euro – even though investors are forecasting a high probability that the Bank of England (BoE) will today cut interest rates for the first time since March 2009. Performance against the US dollar was also better than expected, as sterling hitting a 3-week high against the US dollar before falling away later in the afternoon.

The BoE’s interest rate decision will largely determine the direction of trade for sterling (and indeed its major partners) today. Should they act to lower interest rates as widely expected, we anticipate that sterling will weaken even though markets are fully expecting the cut. Should they surprise markets and leave rates on hold however, sterling looks set to rebound strongly.

If you are looking to buy or sell sterling, we suggest contacting your trader now for live rates, news and currency-purchasing strategies.