Talking Points:

  • British Pound may look past rate hike to MPC minutes, QIR for direction
  • US Dollar unlikely to suffer lasting damage from Trump Fed Chair news
  • Japanese Yen gain ground as risk appetite sours across financial markets

“Super Thursday” is upon us once again. All eyes squarely on the Bank of England as it simultaneously issues a monetary policy announcement, minutes from the meeting of rate-setting MPC committee that produced it, and an updated quarterly Inflation Report (QIR). Governor Mark Carney will also hold a press conference to explain the sum total of what has been unleashed.

A rate hike is widely expected, with markets putting the probability of an increase at a formidable 90.1 percent. This hints that tightening this time is unlikely to offer lasting direction to the British Pound by itself. Hawkish overtones in the Minutes and QIR documents that hint at the start of a rate hike cycle are likely to send Sterling higher. Rhetoric suggesting this increase is a one-and-done affair may have the opposite effect.

Later in the day, the spotlight turns to President Donald Trump as he unveils his pick for Federal Reserve Chair after Janet Yellen’s term expires in February. Governor Jerome Powell has emerged as the front-runner. If he is indeed the nominee, that may be read as comparatively dovish relative to the choice of Stanford economist John Taylor and the US Dollar may lose a bit of ground.

Still, Powell is hardly a committed dove in absolute terms, falling broadly in line with the current FOMC consensus favoring gradual withdrawal of crisis-era stimulus. This means that his appointment would reinforce the generally USD-supportive status quo, so any weakness that the greenback might suffer in the announcement’s aftermath will probably be short-lived.

On the sentiment front, futures tracking the benchmark FTSE 100 and S&P 500 stock indexes are pointing decidedly lower ahead of the opening bells in London and New York. That hints at a period of risk aversion on the horizon. The perennially anti-risk Japanese Yen may emerge as a familiar beneficiary in this scenario, while high-beta currencies like the Australian Dollar struggle.

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Asia Session

Pound Eyeing Guidance Beyond BOE Hike, Trump to Name Fed Chair

European Session

Pound Eyeing Guidance Beyond BOE Hike, Trump to Name Fed Chair

** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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