Forex Today: BoE policy announcements, US data to drive markets
Here is what you need to know on Thursday, February 6:
Major currency pairs stay relatively quiet early Thursday as investors gear up for the upcoming key events. The Bank of England (BoE) will announce monetary policy decisions. Governor Andrew Bailey will speak on the policy outlook and respond to questions in a press conference afterward. Later in the day, the US economic calendar will feature weekly Initial Jobless Claims and Unit Labor Costs data for the fourth quarter.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | -0.64% | -1.59% | -2.31% | -0.82% | -1.16% | -1.37% | |
| EUR | 0.19% | -0.06% | -0.11% | -0.86% | -0.18% | 0.32% | 0.10% | |
| GBP | 0.64% | 0.06% | -1.14% | -0.80% | -0.11% | 0.38% | 0.16% | |
| JPY | 1.59% | 0.11% | 1.14% | -0.75% | 0.92% | 1.34% | 0.85% | |
| CAD | 2.31% | 0.86% | 0.80% | 0.75% | 0.43% | 1.18% | 0.97% | |
| AUD | 0.82% | 0.18% | 0.11% | -0.92% | -0.43% | 0.50% | 0.28% | |
| NZD | 1.16% | -0.32% | -0.38% | -1.34% | -1.18% | -0.50% | -0.22% | |
| CHF | 1.37% | -0.10% | -0.16% | -0.85% | -0.97% | -0.28% | 0.22% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Dollar (USD) struggled to find demand on Wednesday following the disappointing ISM Services PMI data. Additionally, improving risk mood put additional weight on the currency's shoulders, as Wall Street's main indexes registered gains for the second consecutive day. After falling 0.4% on Tuesday, the USD Index lost more than 0.3% on Wednesday.
US Treasury Secretary Scott Bessent said late Wednesday that US President Donald Trump is not calling for the Fed to lower interest rates. "Interest rates will take care of themselves if we get energy costs down and deregulate the economy," he added and said that their focus is on bringing down the 10-year US Treasury yields. After falling nearly 2% on Wednesday, the 10-year yield fluctuates in a tight range above 4.4%.
The BoE is forecast to lower the policy rate by 25 basis points to 4.5% after the February policy meeting. GBP/USD touched its highest level in nearly a month at 1.2550 on Wednesday but erased a portion of its daily gains in the late American session. The pair corrects lower early Thursday and trades below 1.2500.
EUR/USD closed marginally higher on Wednesday but failed to stabilize above 1.0400. The pair was last seen losing 0.2% on the day near 1.0380.
USD/JPY declined sharply and lost more than 1% on Wednesday. After extending its slide to its weakest level since early December below 152.00 in the Asian session on Thursday, the pair regained its traction and turned flat on the day, above 152.50.
Gold preserved its bullish momentum on Wednesday and set a new record-high of $2,882 during the American trading hours. XAU/USD stays on the back foot early Thursday and declines toward $2,850.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
