Bank of England Interest Rate Announcement in Focus this Week

Key Movers

UR/USD fell throughout much of last week as business activity in the Eurozone remained muted at the start of 2020. Latest figures showed a recovery in Eurozone manufacturing PMI, but this was pretty much cancelled out by a decline in the service sector. Combined with the European central bank downgrading growth forecasts from 1.8% to 1.2%, in their January statement, this saw EUR USD fall to seven-week lows. The euro seems to be continuing its decline in early trading this week as markets await Friday’s preliminary GDP and Consumer Price Index for January. In contrast, Wednesday’s Federal Open Markets committee statement and accompanying rate announcement are likely to be non-starter as recent US data remain in line with expectations and FOMC members continue to re-emphasize the message that policy is now on hold. This will therefore have little impact on the USD and its major peers but is worthwhile to watch in case there is any deviation from the expected rhetoric. In other news the Chinese government has extended the Lunar New Year holiday and advised big businesses to either shut down or tell staff to work from home to curb the spread of the deadly Coronavirus. These actions will likely see a negative knock on effect to global trade and Chinese data in the coming months and could see further gains for the safe-haven US dollar. Lastly, with the UK set to leave the EU on Friday, many will be hoping for a new era of prosperity in a post Brexit landscape, but the likelihood is that uncertainty will endure throughout the next stage of Brexit negotiations, leading to increased and prolonged volatility across currency markets throughout out the rest of the year.