Bank of England to decide on changes in interest rates

Daily Currency Update

The USD has shrugged off all losses from Fitch's downgrading in US Treasuries rating and is still on the front foot as markets experience risk-off appetites. The BoE is due to release its monetary policy later today at midday UK time. Markets are leaning more towards a 25-bps hike from the central bank, but a few economists are forecasting a 50-bps hike. According to TD Securities economists, if the BoE hikes by 50 bps and imply tightening policies will continue it will be beneficial for Sterling. If the bank hikes by 25 bps it will be slightly negative for GBP. Whereas, if we see a 50-bps hike and an implication of the bank reaching terminal rate it may be quite hurtful for GBP.

UK inflation expectations have fallen in YouGov's latest poll. 1-year ahead inflation is now expected at 4.3% vs. 5.0% in June and 5–10-year head inflation at 3.2% vs. 3.3% in June. The survey shows that inflation appears to be starting to come under control but is likely to persist over the BoE's 2% target rate for a while to come.