Today in the currency market the key event seems to be the Bank of England's decision on interest rates and the announcement after the meeting. The pound seems to be one of the stronger currencies and may keep this status as the UK may recover economically after brexit and after the epidemic.
The British pound held in the $1.39 area against the U.S. dollar on Thursday as investors appear to remain cautious ahead of the local U.K. election and the Bank of England's monetary policy statement later in the day.
UK interest rates unchanged?
Elections will be held for the Scottish and Welsh governments, for London mayor and for English local councils, a major test for Prime Minister Boris Johnson and opposition Labour Party leader Keir Starmer. In Scotland, a clear majority for the Scottish National Party would increase the number of votes for another independence referendum.
British policymakers will likely leave monetary policy unchanged, but there is a chance they will signal a tightening.
With the UK economy improving and the vaccination program running smoothly, the main FTSE 100 stock index rose on Thursday to its highest level since February 2020. In the U.S., U.S. index futures appear to be settling near record highs, after the Dow Jones Industrial Average closed at a historic high as a result of emerging optimism over the reopening of the economy and a strong boost to corporate earnings. In the latest data, private U.S. companies added 742,000 jobs last month, the most in seven months, and the labor market recovery continues.
U.S. Trade Representative Katherine Tai said on Wednesday that she expects to meet with Chinese officials soon to assess the implementation of the first phase of the trade agreement between the two countries. The outcome of the assessment could affect the fate of Washington's punitive tariffs on Beijing.
Forecast favorable for gold
Investor attention may be drawn to the gold market, where the price of an ounce is once again approaching potential resistance at $1,800. U.S. bond yields have fallen below 1.6 percent and, in turn, inflation expectations have risen to their highest level since 2006, at 2.8 percent. This could deepen negative real interest rates in the U.S., which could be beneficial for gold.
The prevailing expectation is that the Federal Reserve's monetary policy will remain accommodative despite an improving economic outlook. Chicago Fed President Charles Evans on Wednesday reiterated his concerns about reaching the 2 percent inflation target, while Michelle Bowman of the Federal Reserve Board of Governors noted that the U.S. economy may be growing faster than previously expected. On the other hand, Janet Yellen, former Fed chief and now U.S. Treasury Secretary, backtracked from her earlier statement about the need for interest rate hikes to prevent the economy from overheating.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
77.46% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
