24/06 – Bank of England to balance hikes with cases

Jeremy Thomson-Cook
Jeremy Thomson-Cook 24 June 2021

GBP: BOE due at noon

EUR: Supportive data not all that matters

USD: Trend of slower depreciation still in place

Sterling

It is Bank of England day once again and the comments and thoughts of the Monetary Policy Committee will provide the impetus for a move in sterling from noon. I expect that the majority of the comments around the economy will mirror what was said in April although we have seen two substantial changes since then.

Firstly, market pricing of a move in interest rates in the US have popped higher, dragging expectations of a move here higher too. On the other side of the coin, the worrying rise in Covid-19 cases in the UK – putting the infection rate at 5x the rate in the US, Canada, France and Germany – suggests that optimism through the summer may be on shakier ground than originally thought.

There remains the outside chance that GBPUSD can reclaim the 1.40 level today.

Euro

Sentiment indices from European economies were largely positive yesterday and lead into the German IFO figure today in a supportive fashion. It’s unlikely the euro has the power to tear higher in the coming sessions – dovishness from the ECB and hawkishness from the Fed have been enough to take care of that – but a miss on today’s number could spell further euro selling.

US dollar

In the battle between different bands of Fed speakers, it is clear that the market is becoming accustomed to the latest tone from the US central bank; one of cautious hawkishness. The path for the dollar suggests that comments from Fed members are still able to give investors a reason to buy the USD but until wage and job data shows up to back up bullish expectations, the dollar will remain on the back foot.

Jobless claims, GDP and durable goods orders data are all due today.

Elsewhere

Event risk may pick up in commodity currencies in the coming sessions following the news that China is due to sue Australia over perceived dumping of goods into the Chinese economy. Relations between the countries have worsened in recent months and this is the latest iteration.

Market rates

Today’s interbank rates at 08:17 against sterling. Movement vs yesterday.

Euro €1.169 ↓
US dollar $1.396 ↓
Australian dollar $1.841 ↓
South African rand R19.85 ↑
Japanese yen ¥154.7 ↓

Have a great day.