Pound rises on hawkish BoE minutes

United States Dollar:

The pound got a boost yesterday as the minutes from the last Bank of England Monetary Policy Committee cut a hawkish tone. The minutes stated that the decision between holding and raising rates was “finely balanced” for two MPC members. It is safe to say these two members are Ian McCafferty and Martin Weale who last year had voted for an interest rate hike before reverting to keeping them on hold as the UK economy cooled and inflation was driven lower by the collapse in the price of oil. Depending on how the inflation data plays out over the coming months it seems likely we will soon see a 7-2 split in MPC votes, maybe as soon as June. Cable, trading at 1.4935 before the release, pushed up to 1.5040 immediately afterwards. It got as high as 1.5070 at lunchtime but has fallen away since to currently trade at 1.4980 as the dollar has benefitted from a better than expected existing home sales release and risk aversion from the never-ending Greek tragedy. Later this morning, we have UK retail sales with a monthly uptick of 0.4% expected.

We expect a range today in the GBP/USD rate of 1.49 to 1.51.

Euro:

Yesterday saw the ECB increase the amount of emergency lending permitted to Greek banks in an effort to keep them solvent. EUR/USD which had dropped from just below 1.08 to 1.0715 throughout the morning found some support to trade at around 1.0745 after the news. The rally was short lived however and EUR/USD has continued to fall overnight and currently trades at 1.0675. German Chancellor, Angela Merkel and Greek PM, Alexis Tsipris are due for an informal meeting later today in Brussels at the EU’s emergency immigration summit. Tomorrow sees the much anticipated meeting of finance ministers in Riga, Latvia where the Greek government will try and get access to yet more bailout funds. This morning we have seen German and French service and manufacturing PMIs all miss targets, with the French manufacturing figure print a much worse than expected 48.4. GBP/EUR topped 1.40 yesterday for the first time in a month driven higher by the aforementioned BoE minutes. It currently trades at 1.4020. We expect a range today in the GBP/EUR rate of 1.3970 to 1.4125.

Aussie and Kiwi Dollars:

Overnight has seen the latest NAB Quarterly Business Confidence survey from Australia print zero falling from the last reading of 2. The survey highlighted the under-par performance of the Australian economy and re-enforced the opinion of the recent RBA monetary policy minutes that a further interest rate cut may be necessary to stimulate growth. Direction for both the Kiwi and Aussie for the rest of the week is likely to come from the various political meetings in Europe. GBP/AUD trades at 1.9375 and GBP/NZD at 1.9810.

We expect a range today in the GBP/AUD rate of 1.9245 to 1.9475.

We expect a range today in the GBP/NZD rate of 1.9685 to 1.99.

Data releases for the next 24 hours:

AUD: No data

EUR: No data

GBP: Retail Sales m/m; Public Sector Net Borrowing

NZD: No data

USD: Unemployment Claims; Flash Manufacturing PMI; New Home Sales