Pound May Rise Following BOE Inflation Reports Today
The publication of the ‘Bank of England’ Quarterly Inflation Report headlines is in spotlight in European trading sessions. Officials have used the records and its supplementary press conference as the key source for declaring policy and outlook changes over recent years.
As we discussed earlier in our first-quarter prediction, falling Eurozone economic growth expectations have weighed greatly on BOE interest rate hike potentials since mid-2014. The currency bloc is the UK’s leading trading partner, accounting for almost half of exports, making the UK economic recovery from the 2008-09 crisis susceptible to overflow from malaise on the Continent.
Accordingly, it is no wonder that BOE Governor Mark Carney has just clued that policy normalization possibly will come slower than previously estimated. That much is probable to be reflected in the BOE’s updated forecasts for inflation and growth, both of which will maybe edge lower. The most important question is whether this is probable to weigh on the British Pound.
The UK unit has trended lower along with weakening in various measures of the priced-in rates outlook for months. Which means much of the negativity to be expressed in the Inflation Report may be priced in already. This confirms the currency may be excessively more sensitive to a hawkish surprise in the central bank’s rhetoric than a dovish one.
Sterling may not endure too roughly if the markets’ unwinding of rate hike bets is confirmed. If policymakers definitely remind investors that the BOE does not plan to join the increasingly wide-spread lurch toward stimulus expansion and uphold the next policy change will be to ease accommodation, it may get higher instead.
The Australian Dollar underperformed in overnight trade after a poor set of Employment figures fueled RBA rate cut speculation. Certainly, the currency followed downward alongside Australia’s benchmark 10-year bond yield. The market unexpectedly lost 12,000 jobs in January, scoring the largest drawdown in four months, although the unemployment rate climbed to a 13-year high at 6.4%.
The Japanese Yen outperformed, growing as much as 0.5% on average against its major counterparts. The move probably reflected corrective flows after a swell in risk appetite poor demand for the safe-haven unit and drove broad-based losses yesterday.