Tomorrow brings the Bank of England interest rate decision. There is the strong possibility of a rate hike. Personally I do not feel a rate hike is justified. There has been some poor economic data releases that do not fill me with confidence on the UK economy moving forward.
We have seen a drop in average wage growth and also very poor retails sales figures released. Retail sales are expected to pickup following the world Cup. Unemployment is being lauded as the best in decades, but these figures could be slightly misleading as it includes zero hour contracts which is far from a form of stable employment.
It is very difficult to call how the market will react on interest rate decisions. As you would think a rate hike would mean a rise in Sterling value, this is not necessarily the case.
The market moves on rumour as well as fact so there is the chance that the expected hike has already been factored into current levels. The market often moves on Mark Carney’s speech after the decision, where he will discuss monetary policy moving forward.
I think he could well have a dovish tone if there is a hike, expressing a view whereby there will be very little chance of a further hike for the foreseeable future. If this is the case we could see a fall in Sterling value. Be sure to keep this in mind if you are expecting Sterling to shoot up following the decision.
To discuss the upcoming interest rate hike, or following Mark Carney speech feel free to get in touch and I’ll be happy to assist. You can reach me on firstname.lastname@example.org.