Surely they can’t back out now

Today's Currency Market Focus

GBP: Surely they can’t back out now
EUR: Recovery back on track?
USD: Here we go again

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GBP: Surely they can’t back out now

Pound Sterling has been trading in a narrow range ahead of this week’s rate decision.

The odds of a quarter percent rate rise tomorrow stand at around 90% though not everyone is convinced the Bank of England (BoE) will go ahead with the hike.

In fact, Governor Mark Carney has been mocked as an “unreliable boyfriend” having promised rate hikes in the past only to back out at the last minute.

If the BoE do hike, it will be only the second time since the financial crisis. Given the fragile state of the UK economy heading into Brexit, it’s likely to be a ‘one and done’ scenario. If Carney throws some cautious language into the mix, it could actually end up a negative event for Sterling.

EUR: Recovery back on track?

After some wobbles over the last few months, the EU recovery seems to be regaining momentum.

Yesterday both German Retail Sales and Euro-zone Inflation (CPI) came in higher than expected. Inflation in the Euro-zone is now at its highest level since 2012.

While interest rates are unlikely to change in the EU soon, it will start to put pressure on the European Central Bank to sit up and take notice.

USD: Here we go again

Tension is building again between the world’s two biggest economies; US and China.

President Trump is said to be considering proposing higher tariffs on $200 billion of Chinese imports. So far the ‘negotiations’ have stayed civil and not led to a trade war.

Attention will turn to the Federal Reserve (Fed) rate meeting, which is later today. No rate change is expected but the outlook is likely to offer up clues on future hikes. Markets still believe another two hikes in the US could happen before the year is out.

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Current rates:

Wednesday 1st August 2018 at 11:30

£1.00 GBP = 1.1228 EURO

£1.00 GBP = 1.3120 USD

£1.00 GBP = 1.7696 AUD

£1.00 GBP = 1.9288 NZD

£1.00 GBP = 1.7086 CAD

£1.00 GBP = 17.4100 ZAR

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