Market report: pound gains vs euro after Bank of England meeting

GBP

The pound gained against the euro after yesterday’s Bank of England (BoE) policy meeting proved more hawkish than expected. The bank signalled a rate hike could take place in 2022, putting it at least two years ahead of the European Central Bank. 

August’s policy statement gave an insight to what we can expect from the BoE in the coming months. Having previously said raising interest rates would not take place “until there is clear evidence that significant progress is being made”, the bank has now suggested “some modest tightening of monetary policy over the forecast period is likely to be necessary”. 

Interest rates remained unchanged at 0.1% and the bank retained its asset purchasing programme, but still seems likely to act sooner rather than later. 

The BoE also predicted inflation will fall back to just above 2.0% in two years’ time and just below 2% in 3 years’ time, suggesting higher inflation could be around for a long while before it initially drops. The bank’s forecasts for target-busting inflation comes despite saying they agree with the market’s expectations for at least one interest rate rise of 15 basis points to have occurred by the end of 2022.

Key announcements 

12:15 – GBP – MPC member Broadbent speaks 

13:30 – USD – Average hourly earnings m/m – Set to remain unchanged at 0.3%

13:30 – USD – Non-Farm employment change – Forecast at 870k from previous 850k 

13:30 – USD – Unemployment rate – Forecast 5.7% from previous 5.9%