General market theme
The focus today will be on the Bank of England and their meeting on monetary policy and interest rates levels along with their Quarterly Inflation report. There’s a lot depending on what the BoE will decide and how they will approach their forward guidance as the consensus is that the central bank will move forward with a 25bp rate cut while they will offer a grim outlook for the domestic economy. However there’s still the possibility for a higher rate cut while we could see a slightly more optimistic approach to the way they will speak about the economy’s prospects. At any case this event along with tomorrow’s NFP report will dominate the price action at the end of the week.
Price action highlights
The Euro corrected lower yesterday and dropped below the 1.1200 support level as the Dollar seems to be attracting fresh interest ahead of tomorrow’s labor market report. The Euro has benefited from Dollar’s recent weakness but we’re not too sure whether the US currency will be able to gain on the back of tomorrow’s NFP report as there are a few reasons to suggest a lower reading. At any case today the Euro will trade on the back of the Pound’s volatility as the BoE meets to decide their monetary policy and forward guidance so we need to be a bit patient with the Euro for the next 24 hours.
The Cable has been surprisingly stable over the past couple of days given the importance of the BoE meeting today and how much it can affect the price action in the currency pair. The Pound remained largely above the 1.3300 support area over the past 24 hours and now the price action will depend on what the BoE will decide. A modest 25bp rate cut could send the Pound higher as traders could be expecting a more aggressive course of action from the BoE while a 50bp move will send the UK currency significantly lower as it would signal that things are worse than feared in order for such a bold move to be required.
Focus of the day
The Bank of England meeting and their rate cut decision will be the focus of the day along with the Quarterly Inflation report from the British central bank and we believe that it will dictate the price action for the most part of the day. Later in the afternoon the release of the Initial Jobless Claims, Factory Orders and Durable Goods Orders reports from the US will set the stage for tomorrow’s NFP report but we don’t expect any significant reaction from the Dollar.
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