Next to Friday’s non-farm payrolls report, today’s Bank of England monetary policy announcement is the second most important event of the week. Like the Reserve Bank of Australia, the BoE is widely expected to leave policy unchanged. There is only a small chance of tapering but there’s a very high chance of upgraded economic projections. The BoE has a lot to be optimistic about. They are leading the developed world in vaccinations with more than half of their population receiving at least one dose of the COVID-19 shot. New daily virus cases have fallen below 2,000 which is a dramatic improvement from the more than 68,000 cases reported on January 8th. Along with low double-digit to single-digit deaths, the U.K economy is ready to reopen fully by ending all lockdown restrictions on June 21st. Restaurants, pubs, and gyms have been open for a few weeks and the economy is already beginning to reap the benefits with the PMI index rising to its highest level in 89 months. When the country fully reopens, we will see an even bigger boost to growth. While the BoE anticipated recovery, the momentum has been stronger than expected because of how fast the government managed to vaccinate more than half of the population. Combined with the robust recovery in the U.S and the inevitable reopening of euro-area nations, the outlook for the U.K is clearer and brighter today than in February when their last economic forecasts were released. In addition to raising their economic projections, we also expect the BoE to lay the groundwork for summer tapering, which should reignite the rally in GBP. It is actually surprising that sterling traded only marginally higher against the U.S dollar and euro on the eve of the BoE meeting but positioning has a lot to do with this. Sterling has been in an uptrend for the past 6 months and these gains are a reflection of investors positioning for a less dovish BoE. There’s little doubt that the central bank will taper before the Fed and there’s a very good chance they will be the first to raise interest rates as well. So unless the central bank’s statement is littered with concerns or they refrain from upgrading their economic assessment, GBP/USD should trade higher following the monetary policy.
Euro
The single currency gained as Eurozone producer prices accelerated in line with expectations in March, driven by increases for energy and intermediate goods, data showed on Wednesday, reinforcing forecasts of higher consumer inflation in the coming months. Prices at factory gates rose 1.1% month-on-month for a year-on-year increase of 4.3%. Overall, the EUR/USD traded with a low of 1.1984 and a high of 1.2025 before closing the day around 1.2003 in the New York session.
Yen
The Japanese Yen fell as the dollar hovered near a two-week high today in the Asian session, consolidating ahead of a key U.S jobs report that may provide clues on when the Federal Reserve will dial back monetary stimulus. The greenback has rebounded from a one-month low over the past week, swung by U.S. economic data. Overall, the USD/JPY traded with a low of 109.12 and a high of 109.46 before closing the day around 109.18 in the U.S session.
British Pound
The British Pound ticked up as a poll showed Scotland’s main pro-independence party was unlikely to win an outright majority in today’s election, undermining its hopes for a referendum on separating from Britain. Policymakers at the Bank of England meet today when it will publish its May Monetary Policy Report. Overall, the GBP/USD traded with a low of 1.3874 and a high of 1.3924 before closing the day at 1.3903 in the New York session.
Canadian Dollar
The Canadian Dollar strengthened to its highest level in more than three years against its U.S counterpart yesterday, supported by improved investor sentiment and the Bank of Canada's recent shift to more hawkish guidance. Risk-on conditions and the recent move higher in commodity prices bolstered the Canadian dollar. Overall, USD/CAD traded with a low of 1.2249 and a high of 1.2312 before closing the day at 1.2264 in the New York session.
Australian Dollar
The Australian Dollar fell after strained relations between China and Australia took a turn for the worse today after Beijing said it has “indefinitely” suspended all activity under a high-level economic dialogue with one if its largest source of imports. The last meeting under the dialogue was in 2017. The first meeting was held in 2015 when the two countries signed a free trade agreement. Overall, AUD/USD traded with a low of 0.7704 and a high of 0.7764 before closing the day at 0.7760 in the New York session.
Euro-Yen
EUR/JPY is trading above 14, 50, and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The Relative Strength Index is above 64 and lies above the neutral zone. In general, the pair has lost 0.18%.
Sterling-Yen
Currently, GBP/JPY is trading above 14, 50, and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 56 reading and lies above the neutral zone. On the whole, the pair has gained 0.01%.
Aussie-Yen
Currently, the cross is trading above 14, 50, and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 58 reading and lies above the neutral region. In general, the pair has gained 0.40%.
Euro-Sterling
This cross is currently trading below 14, 50, and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 54 and lies below the neutral region. Overall, the pair has lost 0.21%.
Sterling-Swiss
This cross is trading below 14, 50, and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 45 and lies above the neutral region. In general, the pair has gained 0.10%.
Disclaimer
This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.
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