We could be in for a very busy today as the Bank of England are due to release their latest monetary policy at 12pm. According to a recent Bloomberg report the chances of a rate cut appear to be 50-50 so we could see a lot of movement in the run up to the announcement as well as later this afternoon.
If we see a rate cut, this could cause problems for sterling exchange rates as typically when a central bank cuts rates this can often negatively impact the currency involved, in this case GBP.
However, if the Bank of England keep rates on hold this could provide the pound with some much-needed support. Economic data has been mixed during this month, but the most recent data has shown the UK has performed better than expected. This is why the chances of an interest rate cut later today has reduced from 70% to 50%.
The accompanying statement could also cause sterling exchange rates to start moving so make sure you pay close attention to the release later today.
Last night the European Parliament backed the terms of the UK’s departure from the European Union. The Withdrawal Agreement was supported by 621 votes to 49 with the UK due to leave the EU at the end of Friday.
Turning the focus back to the continent and the German government yesterday raised its 2020 GDP forecast from 1% to 1.1% in 2020. According to a statement released by the country’s economy industry, ‘the German economy is gradually overcoming its weak phase, industrial production is expected to recover slowly in the course of the year.’ The expectation is that the domestic economy will increase the overall growth for the country and as Germany is the leading economic power in the Eurozone this helped to stabilise the single currency during yesterday’s trading session.
Germany will release its latest set of inflation data for January so any change could influence the European Central Bank’s economic policy moving forward.
Tomorrow morning, we have the release of both Eurozone inflation data combined with Gross Domestic Product for the fourth and final quarter of 2019. As with inflation GDP can have a big influence on the value of the euro so watch out for any surprises.
The Federal Reserve last night once again kept interest rates on hold much to the disappointment of US President Donald Trump who continually calls for further interest rate cuts.
The central bank have already cut rates three times since the start of the year but the current status quo appears to keep monetary policy as ‘appropriate.’
Therefore, it appears unlikely that the Fed are considering interest rates in the near future. The fears of a global slowdown appear to have dissipated and the movement forward on the US-China Trade War in recent times has helped in strengthening the US dollar which has been trading either side of 1.30 during the course of this week.
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