Does the Bank of England Rate Decision Matter for GBP/USD?
- Pound may ignore UK CPI, BOE rate decision as Brexit fears loom large
- US Dollar may rise as status-quo FOMC clashes with dovish market view
- BOJ, SNB monetary policy announcements may register as non-events
The British Pound began the trading week on the defensive, battered by selling pressure after a poll showed a 55 to 45 percent preference for "Brexit" at an upcoming referendum on June 23. With the vote just looming ever-closer on the horizon, UK CPI figures and the Bank of England monetary policy announcement seem unlikely to generate a meaningful response from the exchange rate.
The FOMC rate decision stands out as the most significant item on the packed economic calendar in the days ahead. The markets' priced-in rate hike outlook has aggressively swung to the dovish side of the spectrum after May's deeply disappointing US jobs report. Within that context, a status-quo forecast that maintains the call for two rate hikes this year projected in March will appear relatively hawkish. Such a result is likely to boost the US Dollar while punishing risk-geared assets such as stocks, commodity-bloc FX and crude oil prices. Gold is likewise vulnerable amid ebbing anti-fiat demand in this scenario.
Policy announcements from the Bank of Japan and the Swiss National Bank are likely to pass with little fanfare as officials remain locked in wait-and-see mode. Australia's jobs report may mitigate any post-FOMC selling pressure on the Aussie in the event that an upbeat outcome cools RBA rate cut speculation. An uptick in the pace of New Zealand GDP growth in the first quarter may offer a similar lifeline to the Kiwi Dollar, particularly after last week's RBNZ policy announcement played down the probability of near-term stimulus expansion.
--- Created by Ilya Spivak, Currency Strategist for DailyFX.com
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