What will happen to the pound after the BoE decision?

The latest UK economic data was surprisingly positive, but markets were more concerned about today’s upcoming communications from the Bank of England (BoE), and so the pound proceeded to weaken.

Sterling is unsurprisingly declining this morning. GBP/EUR is down to €1.1383, while GBP/USD has fallen to US$1.3256. GBP/AUD slumped to A$1.7187, GBP/NZD to NZ$1.9172 and GBP/CAD to C$1.7022.

If you thought the Bank of England meeting was enough to keep markets busy, you’d be wrong. Read on to see what else could cause turbulence today…

What’s been happening?

Better-than-expected October manufacturing data gave the pound an early-morning boost yesterday.

The manufacturing PMI had been expected to hold steady at 59.9, but not only was September’s reading revised up to 56, but the latest index printed at 56.3. The index revealed strength in domestic orders and growing demand for export orders, although there were still points of concern within the data.

Not only did input prices continue to rise at a rate well above the historical average for the index, the production of goods for consumer consumption was also weak.

While markets were temporarily cheered by the data, the focus quickly returned to today’s upcoming policy announcements from the Bank of England. Sterling therefore returned to a weaker footing as the day progressed.

The GBP/EUR exchange rate benefited from market anticipation of yesterday evening’s Federal Open Market Committee announcements. Investors were reluctant to buy in to the euro ahead of such an important declaration.

The US dollar was on soft form ahead of the latest policy announcements, although GBP/USD still weakened throughout the day. In the end, the FOMC left policy on hold as expected, and somewhat disappointed markets by taking a virtually identical tone in its post-meeting communications as those released after the previous meeting.

Markets had expected a much bolder signal that interest rates are likely to rise next month, so the fact this hasn’t materialised has somewhat dented appetite for the US dollar.

What's coming up?

It promises to be a day of big developments all round today. German unemployment data is due shortly and will set the tone of euro movement for the remainder of the day.

The Bank of England’s ‘Super Thursday’ will see the announcement of any policy changes and publication of the latest Inflation Report. There will be plenty here to create volatility for Sterling.

Meanwhile the US dollar could remain on soft form during today’s session as the key event won’t happen until after European markets have closed. President Donald Trump is due to announce his nomination for Chair of the Federal Reserve when Janet Yellen’s term expires in February.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.