British Pound May Rise on Hawkish Turn in BOE Rate Hike Outlook
TALKING POINTS – BRITISH POUND, BOE, TRADE WAR, CHINA, YEN
- British Pound may rise as BOE rhetoric takes a hawkish turn
- Yen up, Aussie and Kiwi Dollars down amid trade war jitters
- FTSE 100, S&P 500 futures hint risk-off trade set to continue
All eyes are on the Bank of England in European trading hours as traders brace for the “Super Thursday” monetary policy extravaganza. Officials are set to deliver a rate hike and offer updated forward guidance via the quarterly Inflation Report (QIR). Minutes from the meeting of the policy-setting MPC committee and a press conference with Governor Mark Carney are also on tap.
UK economic news-flow has notably improved relative to consensus forecasts over the past two months. That has echoed in a steepening of the priced-in BOE rate hike path as implied in futures markets. The British Pound has largely ignored this brightening fundamental backdrop. If the BOE invokes it to justify a hawkish policy pivot however, the currency may finally take notice and turn upward.
The anti-risk Japanese Yen traded higher while the sentiment-linked Australian and New Zealand Dollars underperformed as worries about trade war escalation between the US and China soured sentiment in Asia Pacific trade. The Trump administration is reportedly weighing lifting the proposed tariff on $200 billion in Chinese imports from 10 to 25 percent.
The MSCI Asia Pacific gauge of regional stock performance slid nearly 2 percent, with export-linked names leading the way downward. Futures tracking the FTSE 100 and S&P 500 equity benchmarks are pointing lower before London and New York come online, hinting that risk-off trade dynamics have scope for follow-through in the hours ahead.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.