GOOD MORNING FROM EURO FX The Pound-to-Euro Rate's Forecast For the Week Ahead

EURO FX RATES: EURO = 0.8600 : STERLING = 1.1175

- GBP/EUR is trading near the bottom of its long-term range

- Bank of England meeting is the main event for the Pound this week

- A speech by ECB president Draghi as well as several EU economic assessments are the highlights for the Euro

Data and Events to Watch for the Pound

The main event in the week ahead for the Pound is the Bank of England (BOE) interest rate meeting on Thursday, May 10 at 12.00 GMT.

Whilst previously expectations had been for the BOE to raise interest rates by 0.25% at the meeting, data showing a slowdown in growth and commentary from the governor of the BOE, Mark Carney, which brought into question the necessity of a May hike, have dampened expectations more recently.

Official market expectations now stand at roughly 20% for a hike; and Sterling has decline alongside these fading expectations. A recent survey of economists held by Bloomberg found that none of them now expect a rate hike on Thursday.

Therefore - we would expect a substantial boost were the Bank to defy expectations and raise interest rates. In theory, the Pound could retrace much of the losses witnessed over recent weeks. The BOE's inflation report is also out at the same time, and will show the Bank's latest forecasts for the economy and can provide insight into how the Bank may formulate policy in the future.

If it expects inflation and growth to rise, for example, that could be bullish for Sterling as it will imply more rate hikes, and higher interest rates are usually positive for a currency.

We would expect guidance to be important for Sterling - what does Carney's assessment of the recent growth slowdown, is it temporary or does he believe it to be more entrenched? Will the BOE confirm further interest rate rises are indeed necessary over coming weeks? These are where we see the big story for Sterling lying.

111 views0 comments