Market report: Pound on front foot ahead of Scottish election & BoE meeting


The pound was on the front foot yesterday ahead of the Bank of England’s (BoE) policy meeting and the Scottish election. Especially after one poll showed Nicola Sturgeon’s Scottish National Party (SNP) is likely to miss out on the overall majority she believes would bolster her push for independence.The poll from Savanta ComRes indicated SNP support has dipped in both the constituency vote (down three points to 42) and the list vote (down two points to 34).

Investors will also be keeping a close eye on the BoE’s policy decision and Monetary Policy Report as a quantitative easing programme may be announced. Investors will be hoping that’s not the case, with a shrinking of the programme preferred and may start selling sterling if it is.

BoE policy makers face a number of choices. They can taper the weekly purchases now, taper in June (which would mean a more severe reduction in the second half of the year) or, increase the size of the envelope. Tapering of asset purchases is likely to see sterling strengthen as it’s likely an interest rate hike could be implemented a lot earlier than expected. However, a delay could lead to sterling weakening. Tapering too early could lead to a recession, whereas tapering too late could leave to a rapid rise in inflation.

Key announcements

09:30 – GBP- Final services PMI – Forecast at 60.2 from previous 60.112:00 – GBP– Monetary policy report
12:00 – GBP- Official bank rate – set to remain unchanged
12:00 – GBP – Monetary policy summary13:30 – USD- Unemployment claims – Forecast at 540k from previous 553k