The most important macro event of today's session in all likelihood will be the Bank of England's decision on interest rates. It is widely believed that the central bank will decide to keep them unchanged at 5.25%. On the other hand, for the market itself, both the new economic forecasts published by the bank and the distribution of bankers' votes in the context of today's decision may prove crucial.
BoE decision schedule:
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Create account Try a demo Download mobile app Download mobile app12:00 am BST - BoE decision on interest rates. Expectations: 5.25%. Previously: 5.25%.
- Distribution of bankers' votes (hike-hold-lower). Expectations: 0-8-1; Previously: 0-8-1.
12:30 am BST - Press conference after BoE decision.
The market will want to know how the inflation forecast has changed since the last report in February. At that time, the BOE lowered its median CPI inflation forecast to 3.7% in 2024, down from 4.4% in November, and inflation was expected to fall back to 3% in 2025. At the time, the BOE did not expect inflation to reach its target rate of 2% per year until 2027. The Bank of England announced in February that it expected a bumpy inflation path in 2024. Inflation may have already fallen to 2% in April, we won't know until May 22, when the April CPI is published, but the BOE warns that inflation will rise again later this year.
The money market expects the first interest rate cut by the BOE between June and August. If the BOE intends to cut interest rates next month, we would expect the Bank to clearly signal today that it may do so. As a result, the market appears to be positioning for a dovish stance from the BoE during today's decision.
The GBPUSD pair has been clearly correcting the recent gains for nearly 3 days, and has thus gone below the 1.2500 barrier. What's more, the pair is currently oscillating around the abolition of 50% of the upward wave initiated at the beginning of October 2023, so today's decision could be crucial in order to assess whether the demand side will manage to stop the pound's current downward wave.
Source: xStation
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