Expectations are high this morning in the Carney household (above) whereby the BoE is set to raise rates.
As mentioned in yesterday’s ‘vacances d’été’ blog there is a 90 percent chance of an interest rate rise at midday today. Should we see a rise, expect a modest amount of GBP strength between the announcement and Mark Carneys press conference at 12:30pm. If the hike goes ahead as expected, the press conference will hold a greater significance into Carneys general outlook for the UK economy. Arguably this is one of his most important press conferences to date, as he will be responsible in setting the economic tone as we lead into the prominent Brexit negotiation stages. A notorious pessimist when he held the reins in Canada, so anything mildly positive will come as a welcome relief to the UK.
Nothing from the macroeconomic stand point today with tomorrow’s PMI’s holding centre stage before the week closes.
However interestingly the Italian Finance Minister Giovanni Tria has joined his French counterpart in calling for improved functioning of the EUR area. As per bloomberg “The ministers agreed to prioritise work on the completion of all aspects of the banking union and the creation of a euro area budget to ensure greater stabilisation and convergence within the euro area.” This suggests that Italy (being one of the weakest links) are thinking of their own financial security should we see other countries within the Eurozone take a similar stance to the UK.
Yesterday held no surprises for the US in holding interest rates despite Trumps attack on the federal reserve. Trump stated that the Fed risked ‘killing US economic growth with higher interest rates, with no sign of the central bank would deviate from their plan that they would raise rates in September and see a further hike in December. If this is the case, expect GBPUSD to pull cleanly below the big 1.30 psychological barrier and continue a downward trend. Our forecasts suggest that we expect to see GBPUSD in the early 1.20’s in time for Christmas.
As always, any questions do not hesitate to get in contact with any questions. Enjoy the weather!