The Bank of England voted 8-1 to leave interest rates unchanged yesterday. Sterling gained on the announcement as analysts viewed that the minutes showed that the monetary policy committee were slightly more hawkish than anticipated. The MPC downplayed events in China stating that the slowdown in the Chinese economy will have little effect on the UK. They also saw upside risks to inflation. The pound gained even though interest rate markets are still only pricing in the first hike in interest rates in the second half of 2016. Next week's inflation data due to be released on Tuesday will be very closely watched. For now though it looks likely that the Pound will remain supported.
In light of a fairly sparse data calendar today foreign exchange markets will look ahead to next weeks Federal reserve meeting. Economists are evenly split on the case for an interest rate rise. The dollar has appreciated recently amid improving economic fundamentals in the US however renewed turmoil in global markets has had some market watchers pushing back forecasts. My view is that there will be no rate rise this month although Fed Chair Janet Yellen will keep her options open to hike later on this year which should provide dollar buyers an opportunity to get in at elevated levels before the dollar inevitably strengthens.
Today may well be a range bound session as Traders pause for breath ahead of the key announcement next week. It will provide a perfect opportunity to discuss your requirements with your Halo Financial consultant as there is bound to be significant volatility around the key interest rate announcement next week.