Currency Note

Focus on Bank of England meeting today

By Alex Bennett June 16th, 2022

After weakening to multi-year lows against the euro and the dollar earlier this week, the pound has started to recover overnight and this morning.

This comes ahead of the Bank of England’s latest monetary policy meeting and interest rate decision, which will be announced around midday today. The markets are expecting an interest rate hike of 25 basis points, so if the rise is greater or smaller than this, the pound could be impacted.

Sterling could also be affected by comments and rhetoric from officials, especially as the meeting follows a series of disappointing economic data releases.

The markets are digesting the Federal Reserve’s interest rate decision, which was announced yesterday. Officials hiked the interest rate by 74 basis points and the dollar has strengthened this morning.

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GBP: Pound attempts to recover

After weakening against the euro and the dollar over Tuesday and Wednesday, the pound has made some attempt at recovery overnight and this morning.

The markets now look ahead to the Bank of England’s monetary policy and interest rate decision, which is due to be announced around midday today. An interest rate hike of 25 basis points is expected. If this occurs, it may not have an impact on sterling as it is already ‘priced in’. However, a larger hike could give the pound a boost.

There will also be focus on comments from officials, especially following the poor economic data that was released for the UK earlier this week.

GBP/USD past year

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EUR: Eurozone inflation data due tomorrow

The euro is still stronger against the pound and weaker against the dollar this morning. It strengthened yesterday morning after the European Central Bank announced that it would hold an emergency meeting to discuss current market conditions.

Following the meeting, officials said they would create an “anti-fragmentation” tool designed to limit the borrowing costs of its weakest economies.

Two ECB officials are due to speak this morning. Tomorrow, inflation data for May will be released for the eurozone.

USD: Dollar stronger following Fed meeting

The dollar is stronger against a basket of currencies this morning as the markets digested news from the Federal Reserve’s monetary policy meeting, which concluded yesterday evening.

The Fed raised interest rates by 75 basis points, which marks the largest interest rate hike since 1994 and suggests that further hikes could take place this year. However, Fed Chair, Jerome Powell, stated that “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.”

Housing and unemployment data will be released for the US later today, with industrial and manufacturing production figures tomorrow.

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