Will the Bank of England raise rates by 0.25% or more? Market participants are keeping a close eye on the pound’s movements.

Will the Bank of England raise rates by 0.25% or more? Market participants are keeping a close eye on the pound’s movements.

22.06.2023

In the previous day’s U.S. currency trading, the U.S. dollar rose against the yen after Federal Reserve Chair Powell stated during his congressional testimony that “we are currently far from our inflation target, and it is reasonable to continue raising interest rates at a gradual pace,” adopting a hawkish stance consistent with the FOMC.The USD/JPY pair rose by approximately 100 pips from 141.282 to 142.368, setting a new high for the year. Given that yesterday’s rally brought the pair to the 61.8% Fibonacci retracement level on the daily chart, we will be closely monitoring whether it enters a correction phase.

Among European currencies, the pound—ahead of today’s BOE policy rate announcement—traded in a tight range against the yen. Yesterday, the UK’s May CPI was released, and as the core index rose year-over-year from 6.8% the previous month to 7.1%, the pound climbed by about 80 pips immediately after the release but then fell back for four consecutive hours.It eventually fell to 1749.922. While a rate hike to 4.75% is expected at today’s BOE meeting, traders should remain cautious as to whether the pound will decline following the announcement.

Today’s schedule includes the Swiss National Bank (SNB) policy rate and statement at 16:30, remarks by U.S. Federal Reserve Governor Waller at 17:00, and at 20:00, the UK’sthe Bank of England (BOE) policy rate and statement, and the Turkish Central Bank (TCMB) policy rate and statement; at 21:00, remarks by German Bundesbank President Nagel; at 21:30, U.S. initial jobless claims and the U.S. first-quarter current account balance;22:55: Remarks by U.S. Federal Reserve Governor Bowman; 23:00: U.S. Existing Home Sales, U.S. Federal Reserve Chair Powell’s Congressional Testimony; 23:30: U.S. Weekly Natural Gas Inventories; 24:00: U.S. Weekly Crude Oil Inventories.We need to remain highly vigilant regarding the economic indicators and market movements to see if the Bank of England will raise interest rates by 0.25% or more.