Today is a key day for both the UK and US economies, we have a barrage of important data from both sides of the pond and markets will be on edge as they hold their collective breath in anticipation of the policy affecting data. Today is the day we might see a further decoupling of the GBP from the USD in so far as policy goes and divergence that could see the GBPUSD make new multiyear lows or reclaim more of the post Brexit losses.
Out of the UK we have key releases and statements out of the BOE which will announce the official bank rate and asset purchase facility. Though both are expected to remain unchanged as the BOE waits to see the impact of their last monetary policy expansion before acting. Markets will be more focused on how members voted for an increase, with an increase in yes votes for either a cut in rates or an increase in asset purchasing facility, likely to see dynamic swings in the GBP and uk equities, with the most likely outcome other than keeping them unchanged, being a cut in rates or an increase in the asset purchase facility, we would see the GBP tank across the board as bulls step out the way of a falling knife while equities make a run for the stars as the expectation of cheap money fuels stock buying. The converse is true, should they vote for a reduction of any of the two policy measures.
In the other corner we have the upcoming FED meeting and their release of any changes to the interest rates or monetary policy, which markets have in recent trade priced in at an increasing possibility as we have seen the USD trump its competitors and US equities and indices give back some ground. With the Fed adopting a wait and see policy, today’s data will either fuel the probability of a rate rise or douse the few flames which have been kept alive by FOMC members. Among the 10 releases expected today, the data regarding retail sales, PPI and unemployment claims will be the most watched with better than expected figures here likely to see the USD sore and should the other figures corroborate, we would see the probability of a rate rise being priced in even heavier as the GBPUSD tanks. However, worse than expected data will see the USD slump as the probability of a lift off next week is all but put to bed, a scenarios which would see the USD weaken across the board while US equities and gold climb sharply as risk off sentiment re-establishes itself.