Currency Note

Markets await Bank of England meeting today

By Christopher Nye March 18th, 2021

The latest Bank of England monetary policy meeting will take place around midday today and the markets will be watching closely. Decreasing expectations for negative interest rates have supported the pound over recent months, so any significant developments today could have an impact on sterling.

The Federal Reserve concluded its meeting yesterday. Whilst it now forecasts faster economic growth in the US than initially expected, officials will maintain a cautious approach towards policy changes.

President of the European Central Bank, Christine Lagarde, said this morning that the risks surrounding economic growth have become “more balanced”.

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GBP: Pound looks to BoE meeting

The pound is still at strong levels this morning against the euro and the dollar, ahead of the Bank of England meeting, which will take place at midday today.

Interest rates are expected to be kept on hold; however, the markets will be looking out for any comments about when they could be changed. Officials should also talk about their outlook for the UK economy amid the speedy vaccine rollout and the easing of restrictions over the coming months.

Sterling has been supported in recent months by the decreasing expectations for negative interest rates. If the Bank signals that rates could be hiked in the near future, this could be positive for the pound. Equally, if the BoE take a more cautious or ‘dovish’ approach, then sterling could weaken.

It’s a light day for economic data in the UK today, but the latest consumer confidence figures will be released in the early hours of tomorrow morning.

GBP/USD chart

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EUR: Lagarde says risks have become “more balanced”

The euro is weaker against the pound and the dollar this morning, mainly due to dollar and sterling strength.

President of the European Central Bank, Christine Lagarde, made a speech this morning before the Committee on Economic and Monetary Affairs of the European Parliament.

She said that “the risks surrounding the euro area growth outlook over the medium term have become more balanced,” and added that vaccine rollouts, as well as easing restrictions, underpin expectations for an economic rebound later this year.

Later today, balance of trade and wage growth figures will be released for the Eurozone.

USD: Fed sends ‘dovish’ message

The dollar is strong against the euro this morning due to rising treasury yields, which followed the Federal Reserve’s latest monetary policy meeting yesterday.

The Federal Reserve revealed that it expects the US economy to grow much faster than initially forecast this year and also predicts a recovery in the jobs market. However, Fed Chair Jerome Powell said that policies would not be altered until there is proof of a complete recovery.

Powell said that although the recovery has been quicker than expected, “no one should be complacent.”

Jobless claims figures will be released for the US later today.

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