The pound is mixed this morning, consolidating against the so called “safe haven” currencies, but gaining against the broadly weaker euro amid speculation ECB is not going to continue with its tight monetary policy after their July meeting. Sterling declined against most of its major rivals before the Bank of England announces interest rates today. Market participants expect for the BoE to keep its main interest rate unchanged at record low 0.5% and its bond purchase plan held at 200 billion pounds. At the June meeting six MPC members voted for unchanged policy, while two voted for a tightening and one for a loosening. Prior to BoE meeting industrial production data is scheduled for 9:30 this morning, with the expectations for the figure to have rebounded 1.1% in May after contracting -1.7% in April. Expect for the pound to remain supported against its major peers should we see industrial production data beating the expectations and ECB changing their monetary policy stance.
The euro consolidated against most of its major rivals on speculation European Central Bank President Jean Claude Trichet may signal a slower pace of interest rate increases at today’s meeting. Market participants expect for the central bank to raise its benchmark interest rate by 25 basis points to 1.5% to contain inflation pressures, even as Greece threatens to become the region’s first sovereign default. Mr. Trichet is under pressure to tighten monetary policy as consumer price inflation rose 2.7% from a year earlier in June, but he remain under pressure from European leaders over how to contain the debt crisis.
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