Kantox currency update: ECB and BoE interest rate decisions
The euro and the pound appreciated moderately on Wednesday, with the dollar a tad weaker as news about a new attempt from the US to resume negotiations with China revived risk appetite.
Today, all eyes will be on the monetary policy decisions by the Bank of England and the European Central Bank. Although changes on the benchmark interest rates are practically discarded, the hints about their respective plans to normalize monetary policy might have some impact on euro and pound volatility.
EUR/USD: hovering below 1.1650 resistance. The euro appreciated on Wednesday for the third consecutive day, boosted by the improvement of the market sentiment, but it remains trapped within the last two weeks’ trading range, from 1.1530 to 1.1650. As at London market opening times, the EUR/USD is trading at 1.1635.
GBP/USD: limited below 1.3100. The pound ticked up on a volatile session on Wednesday, with the investors relieved after the pro-Brexit members of UK parliament reaffirmed their support for the Prime Minister Theresa May, although the pair remains capped right below 1.3100. As at London market opening times, the GBP/USD is trading at 1.3035.
USD/JPY pulls back from 111.65. The yen advanced on Wednesday, supported by hopes that a new US-China meeting may ease trade tensions, with the dollar pulling back from 111.65 highs after a three-day rally, although it remains steady above 111.00. As at London market opening times, the USD/JPY is trading at 111.45.
In the Calendar Today
Today in the UK all eyes will be on the BoE monetary policy decision. After hiking rates in August, the bank is expected to maintain its benchmark rate unchanged at 0.75%. With no press release scheduled after the decision, the main interest of this event will be on the results of the voting.
Somewhat later, the focus will shift to the ECB’s monetary policy decision. Although the bank has discarded any interest rate hike, at least for the next 12 months, political pressures to normalize the monetary policy are starting to build up. In this context, the interest will be on Draghi’s press conference, to assess whether there is any change in the bank’s forward guidance.
In the US, the Bureau of Labor Statistics will release the US Consumer Prices Index data. Inflation is expected to have eased in August, although the core CPI is seen unchanged at 2.4%. Only two weeks ahead of a key Fed monetary policy meeting, a sharp decline on inflation might cast doubts about the bank’s intentions to hike rates and, possibly weigh on the US dollar.
11:00 GMT BoE: Monetary Policy Decision
Previous: 0.75% Expected: 0.75%
11:45 GMT ECB: Monetary Policy Decision
Previous: 0% Expected: 0%
12:30 GMT ECB: Draghi’s Press Conference
12:30 GMT US: Consumer Prices Index (YoY) (Aug)
Previous: 2.9% Expected: 2.7%