A host of economic and political data is promised for the final week in January. On Wednesday and Thursday respectively, we will see the latest interest rate decision from the Federal Reserve Bank and the Bank of England. This is closely followed on Friday by the long-awaited official date for the UK to leave the EU.
The first of the big releases on Wednesday will come in the form of the interest rate decision from the Federal Reserve (Fed). This release can have a global impact across all major currencies, as Fed Monetary Policy can impact the global attitude to risk, and therefore the amount of buying and selling of assets and currency worldwide. The release is at 7pm.
The Fed are not expected to move interest rates, but any surprises or comments on future approach to economic policy in the statement following the decision could lead to investors and speculators trying to second guess their next move and the market moving accordingly.
Thursday sees a flurry of data from the U.K, with the Bank of England (BoE) taking centre stage at 12:00pm. The BoE interest rate decision has been one of the key drivers in the value of the pound in recent weeks. According to a recent Reuters publication, the chance of an interest rate cut is just over 50% at the time of writing.
Generally, an interest rate cut can be deemed as negative for a currency as it makes it less attractive to investors, so this decision has global impacts as well as domestic.
An historic event is due to take place on Friday at 11:59pm as Britain will officially leave the EU and enter a transition period. As the UK is setting a precedent by leaving the EU, we can’t predict what the outcome of this event will be. We have seen from Brexit negotiations this far that certainty around the future of the pound has offered it strength, whilst uncertainty and lack of direction has had the opposite effect. The run up to this midnight deadline could throw up commentary from opposing political figures on a subject that has split the nation for the past 3 years.
It is hard to know what this day will bring in terms of volatility for the pound but it is one to be prepared for, as we are likely to hear a little more about what the plans are, and what the approach may be for the next 11 months as the Government attempt to thrash out multiple trade deals and to progress with the second phase of moving forwards with the decision to leave the EU. Political stability can be key to the value of a currency so you cannot rule Friday out from throwing up a few surprises and bring a big day for exchange rates.
Overall, we have a busy week ahead to round off the first month of 2020, if you would like more information about anything within this report then please get in touch with us on 01494 725353. Alternatively, you can request a quote here.
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