Today, the Bank of England’s Monetary Policy Committee (MPC) will announce its policy rate, and the market is leaning towards a 25 basis point interest rate hike, with a minority advocating for a 50 basis point hike. Compared to the US and Europe, the UK has relatively high inflation levels, with the recent consumer price index surpassing the inflation target at +7.9% year-on-year. However, the market’s expectations have shifted due to lower-than-expected inflation figures, with the 50 basis point hike gaining traction.
At this meeting, Mr. Dingra is the only committee member perceived as dovish, and how he votes on maintaining the status quo could influence market sentiment. There is a possibility of a more divided vote this time.
Today is “Super Thursday,” and economic projections will be released. In the previous May release, both inflation and growth forecasts were upwardly revised. Given recent significant declines in housing prices, the focus will be on whether this time’s projections will lean towards caution.
Bank of England Governor Bailey has expressed concern about persistent inflation pressures but continues to maintain the view that inflation will sharply decline in the near future. His stance seems somewhat indecisive, and a more detailed explanation is expected in this meeting.
The market is currently in a US dollar-strong trend, and if the Bank of England’s announcement does not show unexpectedly hawkish views, there is a view that selling pressure on the pound may spread. Market participants are keen to observe the reaction.
Following the Bank of England’s announcement, several economic indicators will be released in the foreign markets, including Turkey’s Consumer Price Index (July), Eurozone Producer Price Index (June), Final Services PMI for France, Germany, Eurozone, UK, and the US (July), US Challenger Job Cuts (July), US Nonfarm Labor Productivity (Preliminary) Q2 2023, US Initial Jobless Claims (July 23 – July 29), US Factory Orders (June), US Durable Goods Orders (Final) (June), and US ISM Non-Manufacturing PMI (July). The ISM Non-Manufacturing PMI is expected to decrease from 53.9 to around 53.0.
Regarding speeches and events, attention will be on Bank of England Governor Bailey’s press conference following the policy announcement, and the contents of the economic projections that will be released along with the statement.
The focus will be on how other currencies react to the Bank of England’s policy announcement and economic projections later today.
