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Dovish Bank of England causes Sterling drop

4th August 2017 Market Update

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🇬🇧 GBP – The headline news for the day came from the UK, with the BoE voting 6-2 to keep interest rates at 0.25%. Subsequently, GBP dived to a nine-month low, partially owing to the fact that no new members voted for a hike, but mainly as the BoE revised down its growth and inflation forecasts. Although most economists taking part in a Reuters poll had forecast a 6-2 vote to keep rates on hold, some had thought that chief economist Andy Haldane could join those calling for an immediate hike.

In the accompanying minutes Mark Carney downgraded growth expectations, adding further punishment to the pound. The level of business investment in 2020 is now set to be 20% lower than pre-referendum. Forecasted lower consumer spending has led to GDP growth expectations to be revised down from 1.9% to 1.7%. Following the data and minutes, Sterling dropped over a cent against the dollar, and around 1% against the euro.

🇪🇺 EUR – There was no significant data out from the Eurozone yesterday, but the single currency enjoyed gains against the pound following weak UK data. There is nothing out from the ECB today either, but the euro is expected to hold its gains.

🇺🇸 USD – The dollar traded relatively flat against the euro yesterday, but gained versus the pound as Sterling weakened. There was little in the way of data, as services PMI was positive but had little impact. In focus today non-farm payroll figures are released, which are expected slightly lower at 183k. The dollar has weakened significantly recently and investors will be hoping for a good figure to try to claw back some of its losses.

 

Key Announcements

🇺🇸 USD
13:30pm – Non-farm payroll data from the US
13:30pm – US Unemployment rate

 

Our View: With no data being released from the UK or the Eurozone, the pound is likely to remain at current lows as we head into the weekend. Data from the US will probably set the tone for the afternoon, with investors hoping for positive employment data.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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