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Sterling susceptible to BoE risk this week

Pound Sterling range-bound (for now)..

Sterling fell for 4 consecutive days versus the Euro last week and April's low of 1.1570 mid-market could be tested this week. Unlike last week though, that potential test will come from internal events in the form of the latest BoE interest rate decision and following meeting.

Thursday is a risk event for the Pound and we find ourselves in a 'more to lose than gain' scenario. There is greater scope for a dovish outcome to the event compared to a hawkish one and therefore a very real 'stick or twist' moment for many. We expect either a 50 pip gain or a 1-cent loss..

Members of the MPC have been more openly aligned with their views on interest rate cuts recently and so any vote for either a rate hike or cut, will force GBP the same way. Talk of a rate cut for June at the meeting or a vote for a rate cut this month is clear dovish signal. A hawkish signal would be a 'nothing much has changed' stance.

Last week, market expectations rose once again that the Fed will cut interest rates by the end of the year, after being consistently pushed back. This hurt GBP v EUR but aided GBP v USD. The former happened because earlier expectations of the Fed cutting rates could entice the BoE to do the same. The latter is Dollar negative because the 'higher for longer' interest rates are good news for the related currency. 

The Euro and EU had a good week overall last time out with a 0.5% gain against most currencies and a strong economic performance. More gains are expected this week mainly due to momentum and by events happening elsewhere..

It was a 'bitty' week for the US/USD last week with mixed releases, leaving traders and investors alike none-the-wiser. The main data that got the biggest airtime was the jobs report, which came in softer than expected. Payrolls were down, the unemployment rate rose, as did average earnings, all leaving the Fed scratching their head over what to do now..

Expected mid-market ranges for May 7th 2024

    $1.2500 - $1.2600    

    €1.1600 - €1.1700    
Upcoming Data
Monday 6th May 2024

Tuesday 7th May 2024
20:00 US - Consumer credit change

Wednesday 8th May 2024
09:00 EU - Italian retail sales
12:00 US - Mortgage applications 
15:00 US - Wholesale inventories

Thursday 9th May 2024
12:00 UK - BoE interest rate decision & MPC meeting
12:30 UK - BoE Governor Bailey

13:30 US - Initial/continuing jobless claims
17:15 UK - BoE Pill speech

Friday 10th May 2024
07:00 UK - GDP, goods trade balance & industrial/manufacturing production 
09:00 EU - Italian industrial production
12:30 EU - ECB Monetary policy accounts
19:00 US - Monthly budget statement