Home Daily Commentaries Markets await interest rate decision from the Bank of England

Markets await interest rate decision from the Bank of England

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Thursday 20 June, 2024

Daily Currency Update

In Europe, the focus this week has been on France as they prepare to hold elections on the 30th of this month. The rise in popularity for Marine Le Pen’s National Rally party has unnerved markets and is weighing down European Bond markets.  France and Italy in particular carry large debt loads and investors are moving assets into the “safe haven” German bond market.

CPI (Consumer Price Inflation) in the UK hit a three-year low yesterday, falling to the Bank of England’s 2% target. However, components within the inflation figure are creating concern, namely wage inflation which remains particularly high. It is for this reason that markets do not expect the Bank of England to cut rates when they meet later today.

US markets were closed yesterday for Juneteenth, which allowed the US dollar to trade in a tight, directionless manner.  Markets will look to digest the retail figures released on Tuesday which disappointed and increased speculation that the Federal Reserve will cut rates twice this year.

Key Movers

The euro remains close to its recent lows as concerns that a new Government in France could weaken fiscal discipline increasing the debt risk premium across the Eurozone. ECB chief economist, Philip Lane, said that recent market turmoil was not “disorderly”, and the single currency has reflected this view by only edging slightly lower in recent weeks.

In the UK, markets are predicting a 25% chance of a rate cut by the Bank of England in August, down from 50% before inflation data was released this week. Although no change is expected for interest rates later today, markets will watch for dovish comments from the Bank of England’s Monetary Policy Committee which could lead to a weaker pound.

In the US, we saw the release of MBA (Mortgage Applications) for the week ending June 14, which rose by 0.9%. The remainder of this week is quiet for economic data releases and markets will turn to look at Federal Reserve members comments around the timing of their first interest rate cut this year.

Expected Ranges

  • GBP/USD: 1.2670 - 1.2730 ▼
  • GBP/EUR: 1.1825 - 1.1875 ▼
  • GBP/AUD: 1.9010 - 1.9070 ▼
  • EUR/USD: 1.0690 - 1.0740 ▼

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.

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