The main topic over the last couple of weeks was the Bank of England, after 3 members (Including the Governor) came out and said they see a case to potentially cut interest rates this month- the chances of this cut rose to 50/50 and was highly dependant on certain data releases from the UK, namely employment and PMI.
By Friday morning all UK data for the week had been released and actually suggested that the UK economy is definitely on the road to recovery, especially with manufacturing PMI ahead of expectations alongside services PMI showing the same sentiment.
With these data results in mind, I do not see a real case for the BoE to cut interest rates in January- so, quite rightly, we have seen Sterling bounce around 1.5% this week following these positive data releases.
In regards to the actual decision on Thursday, I am not expecting a lot of positivity, I think Sterling may trade lower leading up to Thursday, and I am expecting the BoE to be quite bearish, as they will want to keep a rate cut up their sleeves if it’s needed at some point this year, also, inflation figures are still relatively low, at 1.3% (BoE target is 2.0%) so there is still a small case to cut if they wanted to solely look at increasing inflation.
The main focus this week will be on Thursday- if you would like to find out how you can protect your exposure- please don’t hesitate to contact me directly.