Pound May Rise as Bank of England Rhetoric, Market Outlook Clash

Talking Points:

British Pound May Rise as BOE Rhetoric Clashes with Dovish Market View
Fed-Speak May Rekindle Risk Aversion After Early Selloff Fizzles Overnight
Gauge Trends and Spot Reversals in Leading Currencies with DailyFX SSI

A monetary policy announcement from the Bank of England headlines the economic calendar in European trading hours. Governor Mark Carney and company are expected to keep things unchanged for now, putting the spotlight on minutes from the meeting of the rate-setting MPC committee to gauge where officials’outlook going forward. Priced-in BOE rate hike expectations have tumbled over recent weeks, making it relatively difficult to engineer a dovish surprise versus a hawkish one. On balance, this may lay the groundwork for a British Pound recovery.

Risk aversion returned as a formative catalyst in early Asian trade as regional stock exchanges picked up cues from a selloff on Wall Street. The New Zealand Dollar underperformed among the risk-geared currencies. The Australian Dollar proved more resilient after December’s Employment figures topped expectations. The report revealed that the economy lost a net 1,000 jobs last month, a markedly better outcome than the 10,000 drawdown projected by economists.

Negativity appears to be waning ahead of the opening bell in Europe however, with Asian bourses trimming losses and S&P 500 futures pointing gently higher to signal a possible respite ahead. Downbeat sentiment may return on the back of hawkish Fed-speak however. Comments from James Bullard, the President of the central bank’s St. Louis branch and a voting member of this year’s FOMC committee, are due to cross the wires in the coming hours. Bullard has struck an unambiguously hawkish tone in recent months and more of the same may weigh on confidence if his remarks fuel fears of an aggressive Fed tightening cycle.

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