The latest ForexLive preview looks at tomorrow's Bank of England interest rate decision and Minutes release
Both announcements arrive with us today at 12.00 GMT and I see nothing to change my long-held view that interest rate rises will not be happening here any time soon.
Recent GBP declines would now tend to support that view with many banks/institutions pushing back their lift-off expectations until Q4 or early 2017. Popular consensus previously for an early rate hike, especially when the Fed went for lift-off, led to the GBP demand but all that changed in the second half of last year and we've seen GBPUSD fall to 1.4351 yesterday from 1.7180 in 2014 and 1.5930 last June.
The Trade Weighted Index (TWI ) at that time was looking solid above 92 but yesterday we saw 8-month lows of 89.2 and that will please Carney & Co. Without actually talking down the pound the MPC's largely dovish rhetoric has done the job to a degree although many GBP pairs, especially those commodity-linked such as GBPCAD and GBPAUD, are still in higher rather than lower territory.
Recent economic data has been less that supportive with December services PMI failing to show any improvement at 55.6 and yesterday's soft industrial production numbers sent the pound on a downward spiral highlighting it's offered tones. In the last Minutes the MPC noted flattening wage growth and latest data supports that view.
No interest rate rises any time soon then on economic performance and no support from inflation either as oil price falls continue to make their impact. The only bullish show in town is recent UK housing data but that is regionalized and the BOE have said they will regulate rather than hike to stem the rises.
BOE gov Carney has a lot to consider right now but interest rate hikes aren't one of them
So as well as the Minutes minutiae ( don't expect any thing other than dovish/cautious) the focus will be on the vote ( currently 8-1 against lift-off). Little chance of any additional dissenters so let's see if arch-hawk McCafferty is yet to be convinced. If he turns around for 9-0 then expect the pound to get sold if only on knee jerk reaction.
I'll give you some GBP levels nearer the time ( a lot can happen in 24 hours ) but GBPUSD support at 1.4350 is the big stand-out at the moment and EURGBP outside of the current 0.7445-0.7555 range.
As always we must expect the unexpected, and as always trade what you see, but anything hawkish is unlikely. The market though will have some/a lot of the dovish element priced in and we could yet see some relief for the pound but I remain a rally seller until other wise convinced.
That moment is still some way off.