All eyes on key interest rate decisions today

GBP had another good day against the euro yesterday when we saw it spike, briefly, to a 7 year high against the common currency – a heady 1.38 (Interbank). The same couldn’t be said for its performance against the dollar where we saw it take a dip of 0.70% and an overall 3 week low of 1.52. One main reason given for the loss was the release of PMI data that showed a lower than anticipated reading of 56.6 (expected at 57.50). Today we’ll see the Bank of England make an interest rate decision/announcement – but with nothing expected to change, GBP may take direction what from is occurring elsewhere. Tomorrow we’ll see the BoE announce its consumer inflation expectation – expect losses for the pound if the figure comes in at less than 2.5%.

Within the Eurozone, it was another no‐so‐great day for the single currency with it weakening to its lowest level since 2003 against the US dollar, along with the weakening against the pound mentioned above. Weakening off can be attributed to poor Markit Services PMI data for what seemed the majority of European countries in the commonality. While retail sales were seen to increase for the Eurozone as a whole, it wasn’t a significant enough figure to instigate a positive upswing and help stop the rot. The main problem is the deflation issue, as well as the Greece debacle – with interest rates at record lows, everyone is waiting to see what further QE measures will be put in place. We’ll see more information from the ECB this afternoon as to what their next quantitative easing move is ‐ €60Bn of bonds is expected to begin a month which will help feed new funds into the financial system. This is all be contributing a volatile euro – and we see Mario Draghi speak this afternoon about the interest rate as well which should stoke some movement.

Stateside, the dollar has been on the up and up over the last few month and we now see it sit at a 12 year best against EUR. Positivity was seen from non‐manufacturing data which came in better than expected at 56.9 – this has bolstered speculation that interest rates will be increased in the next few months. Out today is non‐farm productivity which give a further bump up, and some punters think that things could get 3‐4% better for the dollar over the new couple quarters.