This morning has seen GBP continue to lose further ground against both The Euro & US Dollar in particular as we lead up to The Bank of England’s rate decision tomorrow. Current feelings within the market are pretty much in line with rates being unchanged, however what we anticipate might move the markets is whether the number of members voting for a cut will have increased from the solitary one member last time, or whether it’ll still be a minority in favour.
May’s Federal Reserve Interest Rate meeting took place last night, and for a change it was pretty much a non-event in the markets. The Central Bank has again kept Interest Rates on hold at their current levels of 5.5%, this has shown a complete U-turn by officials after initially stating in January that rate cuts were just around the corner.
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Sterling exchange rates are in a strange position currently, on one hand, they are outperforming against the Euro, and on the other, severely underperforming against the U.S. dollar, which has strengthened by 3% since March. On Friday, GBPEUR closed at 1.1680, a solid level which gives enough of a case for Pound to Euro exchange rates to push up further in the near term.
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The recent dovish sentiment from BoE on their stance on interest rates has seen GBP fall sharply, in particular to the USD. After both Bank of England members Bailey and Ramsden last week announced a different path for BoE on their monetary policy, suggesting that inflation levels have fallen steeper than anticipated.
Sterling has this morning failed to capitalise on the stronger than expected inflation figures released yesterday for The UK, mainly due to comments made by Bank of England Governor Andrew Bailey.
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