Currency Note Sterling

Sterling awaits central bank decisions on interest rates

By Ricky Bean February 6th, 2014

Sterling had another see-saw day yesterday, finishing near where it started and holding close to 12 month plus highs against the euro and the US dollar. Initial losses came from the UK side as the final purchasing managers’ index (PMI) figure of the week came in behind expectations. Yesterday’s came from the services sector, and with this making up a large portion of the UK economy the disappointing figure triggered a fall for sterling. Reactionary movements to news elsewhere reversed sterling’s fall.

Today sees potentially significant events from the UK, as the Bank of England (BoE) holds its monthly meeting. While its policies are not expected to change, any further future guidance from them will be of particular interest to investors, especially given recent unemployment data, which has been promising. With this figure rapidly nearing the BoE’s current 7% threshold for considering interest rate hikes, there has been some market chatter suggesting that the central bank could lower this threshold to hold interest rates pegged for longer. With no other data due, the outcomes of this meeting and the European Central Bank (ECB) monthly meeting will likely govern sterling movements during the course of the day. If the ECB do cut rates and/or increase liquidity to the banks we could see sterling move sharply higher.

Wondering whether to buy or sell sterling? Get in touch with your trader for the latest rates, or for currency-buying strategies that can allow you to reserve favourable rates in advance.