- Pound (GBP) looks to BoE monetary policy announcement, no rate cut is expected but an increase to the asset purchase programme is forecast.
- Central bank meeting comes as UK inflation hits 4 year low and UK GDP contracts 25% in 2 months
- Euro (EUR) mildly higher despite yesterday’s inflation data revealing a -0.1% decline in prices mom
- At 05:15 UTC, Pound Euro exchange rate (GBP/EUR) trades -0.1% at €1.1154
The Pound is slipping lower ahead of the Bank of England rate decision later today. The Pound Euro exchange rate settled on Wednesday flat at €1.1167 after trading a tight daily range of just 60 points.
At 05:15 UTC, GBP/EUR is trading -0.1% at €1.1154 with all eyes on the bank of England.
The BoE are expected to keep interest rates at 0.1%, the lowest level in 300 years. However, the central bank is also widely expected to increase its Asset Purchase Programme by £100 billion. There is a chance that some policy members will be even more dovish and want to add more stimulus.
Since the start of the coronavirus pandemic, the central bank has cut rates twice from 0.75% to 0.1% and announced £200 billion of new quantitative easing bringing its bond buying total to £645 billion.
The BoE will be under pressure to act after data from Office of National Statistics (ONS) revealed that inflation in the UK increased at 0.5% in May compared to the year earlier. This was the weakest pace of inflation growth in 4 years as the coronavirus lockdown saw demand for non-essential good evaporate and fuel prices tumble. Data last week showed that the UK economy contracted an unprecedented 25% across March and April.
The Euro is trading ahead of a relatively quiet day on the economic calendar. The European Central Bank’s economic bulletin is the only item on the economic calendar.
The Euro traded broadly flat in the previous session even as inflation in the region eased. Consumer prices declined -0.1% in May, after rising 0.3% in April according to figures released by Eurostat. The figures were inline with analysts’ expectations, with energy prices creating the biggest drag following the huge drop in oil prices.
The core rate of inflation, which excludes more volatile items such as food and fuel was unchanged at 0.9%. This is still a significant distance from the European Central Bank’s 2% target.
