This Pound Sterling forecast examines factors that could affect GBP exchange rates today.

Interest Rate Decision to take centre stage

Today the Bank of England (BoE) are due to make their latest announcement on interest rates with the expectation that rates will remain on hold at the record low of 0.5%. While the majority of the markets believe we are unlikely to see a surprise move in rates what is a little less clear is how the members of the BoE’s Monetary Policy Committee (MPC) will have voted. We have recently seen a sole member of the MPC in the form of Ian McCafferty, vote for interest rates to be put up meaning the vote has been split 8 – 1 (with there being 9 members of the MPC).

However, the recent slowdown in the global economy, caused largely by some weaker figures coming out of China, may cause Mr McCafferty to re-think his position and could even lead to other members to consider a cut in interest rates to stave off the threat of an economic downturn in the UK.

While I do think the economic issues starting to effect many parts of the global economy are going to negatively impact the UK I think it could be a little early for calls of a rate cut this month. We will be keeping a close eye on the rhetoric used in the statement accompanying the rate announcement for any signs of committee members starting to consider this though. If the economic situation worsens I would not be surprised to see some more dovish members of the MPC vote for a rate cut in the coming months which could lead to Sterling weakness.

Today’s decision will be keenly watched by the markets and could lead to considerable volatility for Sterling exchange rates in the lead up to and announcement of the decision at midday today.

UK Service Sector Grows

It was announced yesterday that the UK’s service sector was continuing to grow with the figures coming out higher than both last month and also the predicted number. This is good news for the Pound as the service sector makes up a large part (approximately three quarters) of the UK’s economy and as a result should bring some support to Sterling.

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