Last night the FED raised their interest rate by a whopping 0.75% to 1.75%. This was higher than the predicted 0.5% rise analysts had cited.
Until that point the Pound had been gaining nicely versus the Dollar after hitting 2 year lows. However that rate decision is hawkish meaning the Dollar immediately started strengthening again and the GBP/USD rate looks likely to retest the lows of yesterday morning.
Against the Euro it's a slightly different story. The Pound has picked itself up off the lows seen yesterday morning and has got itself back to the bottom of the recent trading range. The next few hours will be telling as we head towards the Bank of Englands rate decision at lunch time.
Analysts are predicted a modest rise of 0.25% in the base rate and are expecting the Monetary Policy Committee to vote that through 9 to 0 i.e. unanimous. This will bring the base rate to 1.25%. The belief is this will help curb inflation.
0.25% looks nailed on. However, if the MPC decides to follow the FED and put 0.5% onto the base rate then we could see a strengthening of the Pound. Weighing against this is the recent GDP and employment numbers out from the UK. Either way it's going to be an interesting day.
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
UK: 12:00 Bank of England Rate Decision
UK: 12:00 MPC Vote Count
UK: 12:00 BoE Asset Purchase Facility
UK: 12:00 MPC Monetary Policy Summary
JPN: Friday 04:00 BoJ Interest Rate Decision