General market theme
All eyes are on the Bank of England today as it is time to decide the interest rate policy for the coming period on the back of the Brexit vote and the changes in the PM seat just yesterday. The BoE will convene today in order to decide whether a lower interest rate policy is appropriate at this time or whether they should wait for the time being before lowering their key interest rate. However it’s looks almost certain that even if they leave rates unchanged for now they will take this opportunity to prepare the market for a lower rate policy pretty soon as the UK domestic economy seems to be slowing down, even before the Brexit decision. The pound is expected to dominate the price action today but its flows will also affect the euro and the FTSE 100.
Price action highlights
The euro has been quite edgy over the past couple of days and yesterday even though it tried to penetrate below the 1.1050 level it reversed and looked to the upside once more. This morning the single currency is trying to overcome the 1.1120 resistance for yet another time but it seems difficult that it will be successful in doing that, the most likely scenario involves another reversal and a push towards yesterday’s lows depending on how the pound will trade since the EUR/GBP flows will ultimately affect the euro itself as well.
The cable is attracting everyone’s attention today in light of the BoE meeting in order to decide the interest rate policy and the UK currency has been quite unstable since yesterday. The push lower all day took the pound all the way down to the 1.3100 area where support was found and the overnight rally allowed the UK currency to reach the 1.3250 area this morning waiting for the BoE meeting. Most indications point towards a bearish outcome with a lower rate policy or at least a market warning that rates will come down being the 2 most likely scenarios and the pound will take a blow should that be the case.
Focus of the day
Apart from the BoE meeting to decide the interest rate policy for the UK the economic calendar doesn’t hold too much for the day ahead. The release of the Initial Jobless Claims from the US is an important release that we need to note down in order to better assess the US domestic economy but investors will be focused on the BoE meeting and the price reaction that will come on the back of it.
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