So let's talk interest rate decisions. Overnight the Sterling strength slowed up and started retreating again as financial commentary turned towards the Bank of England keeping interest rates where they are next Thursday. Last month an interest hike was supposedly nailed on, and when it didn't happen the Pound took a pummelling. Here in the office the majority of us have been around finance long enough to know that nothing is ever nailed on. If it were, as a famous Mr Trotter often said, "This time next year, we'll all be millionaires".
So why is it important? The interest rate is the lever the Bank of England can pull to theoretically heat or cool the economy. Pushing up rates means it costs more to borrow so should slow people down from borrowing and therefore spending. So if rates go up it indicates a strong economy which the BoE is trying to slow down. A good analogy is a locomotive. Too slow and sluggish and no one uses it, too fast and it runs the chance of derailing.
It's a fight between the potential outfall of Omicron and inflation. The BoE is now expected to keep rates where they are due to the unknowns around the new variant and what effect it could have on the economy. However the UK inflation numbers are out next Wednesday ahead of the rate decision so it's going to be an interesting tug of war.
So for now the Pound is softening up but we don't expect this to move vastly without a bigger news story.
If you follow the Canadian Dollar there's the Bank of Canada interest rate decision out later, but the bigger driver of the markets will be the Chinese inflation numbers out in the early hours of tomorrow.
As ever we look forward to keeping you in the loop and look out for our next update.
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Today’s Economic Calendar
CAN: 15:00 Bank of Canada interest rate decision
CHN: Thursday 01:30 inflation data
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