Despite an afternoon push higher, the British pound ultimately ended the day lower versus the US dollar on Friday as many of the major currencies remain in consolidation mode amidst high volatility.
The fundamental outlook for the UK remains bleak though, and upcoming releases from the UK should highlight why Credit Suisse overnight index swaps are pricing in at least a 50bp rate cut by the Bank of England at their next meeting in December. On November 18, UK CPI is anticipated to drop to an annual rate of 4.8 percent in October from 5.2 percent, though this has potential to fall much lower seeing as though the BOE believes the index will fall “well below” their 2 percent in 2009. Meanwhile, the BOE’s meeting minutes tend to be a huge market-mover for the British pound, and will be released at 4:30 ET on November 19. During the November 6 meeting, the BOE’s Monetary Policy Committee unexpectedly slashed the Bank Rate by a whopping 150bps to a 53-year low of 3.00 percent. This came on the tails of the BOE’s participation in the October 8 coordinated rate cuts, during which they reduced the Bank Rate by 50bps. The key to trading this release will be to gauge the vote count, as indications that the decision to cut rates was unanimous along with dovish comments by the MPC could lead the British pound to pull back sharply. Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.