Week Ahead: Fed-BOE policy gap to impact GBPUSD
The Federal Reserve and the Bank of England’s respective policy meetings will be central to market sentiment over the coming week, amid these scheduled economic data releases and events:
Monday, September 20
- CAD: Canada federal election
Tuesday, September 21
- AUD: RBA meeting minutes
- SEK: Sweden rate decision
- OECD releases Interim Economic Outlook
Wednesday, September 22
- CNH: China loan prime rate
- JPY: BoJ rate decision
- EUR: Eurozone September consumer confidence
- US crude: EIA crude oil inventory report
- USD: Fed rate decision
Thursday, September 23
- EUR: ECB publishes Economic Bulletin
- Markit manufacturing PMIs for Eurozone, UK, US
- GBP: BOE rate decision
- USD: US weekly initial jobless claims
Friday, September 24
- EUR: Germany IFO business climate
- USD: Fed speak – Fed Chair Jerome Powell, Fed Governor Michelle Bowman, Fed Vice-Chair Richard Clarida, Cleveland Fed President Loretta Mester, Kansas City Fed President Esther George
As the US and UK recover from the pandemic, the Federal Reserve and the Bank of England are closer to easing up on their respective support measures.
And with the BOE thought to be closer to a hike than the Fed, no surprise that the British pound has advanced almost one percent against the dollar so far this year.
Although cable formed a death cross recently, the declines that typically follow such a technical event are not necessarily assured.
It could well boil down to how far apart the Fed and the BOE are in moving towards pre-pandemic policy settings.
- The Fed funds futures are forecasting an 82% chance of a US rate hike.
- Markets are pricing in a 50% chance of a BOE rate hike in March, and 86% chance for a May hike.
To be clear, neither central bank is expected to actually adjust their policies this month. However, any commentary on policy outlook will be closely scrutinized in determining where GBPUSD should head to next.