Bank of England unanimous on holding rates despite Eurozone improvement

Enrique Díaz-Álvarez23/Apr/2015Currency Updates


Sterling soared against its peers on Wednesday morning after the release of the Bank of England’s minutes from the April meeting. The Pound ended London trading 0.5% higher.

As expected the Bank of England once again voted unanimously to keep interest rates unchanged at their latest monetary policy meeting. The minutes themselves were slightly more hawkish than expected, with two of the members, likely Martin Weale and Ian McCafferty, seeing the decision as “finely balanced”. An improvement in economic performance in the Eurozone caused the committee to once again remain in agreement that the next change in the interest rate would be a hike; in contrast the words last month from chief economist Andrew Haldane that suggested rates could be lowered. Members also deemed it unlikely that economic growth could continue at its current pace without generating greater inflation in wages and prices. In the minutes, the committee also slipped in a comment that indicated markets are being too relaxed about the timing of the upcoming rate hikes. The path of the Bank Rate expected by financial markets is now “exceptionally flat” according to the central bank.

This morning could see moderate volatility in the Pound with the announcement of retails sales in the UK from the Office for National Statistics at 9.30am.


A mostly disappointing day for the Euro on Wednesday saw the single currency fall by 0.4% on the Dollar and 0.9% on Sterling.

Consumer confidence in the Eurozone economy dipped marginally for the first time in five months in April, amid mounting concerns about the possibility that Greece will default on its debts. Confidence last month surged to its highest position in eleven years, although unexpectedly dipped this month to -4.6 from -3.7 in March. Analysts were expecting a reading of around -3.0, following the encouraging performance post-ECB quantitative easing. Elsewhere in Europe, retail sales in Italy remained close to unchanged year-on-year at 0.1% having decreased by 0.2% in February, while industrial orders remained negative for the second consecutive month at -0.9%. Elsewhere it was reported that the European Central Bank has raised the cap on its emergency liquidity assistance (ELA), which Greek banks can draw on, by €1.5bn to €75.5bn.

Growth in the services and manufacturing sectors is expected to have expanded in April when official data is released from Markit at 9am this morning from Eurostat.


Impressive housing data in the US economy released yesterday afternoon contributed to gains for the Dollar, with the US Dollar index increasing by 0.4% on Wednesday.

There was some encouraging housing data released in the US yesterday that suggested the economy was recovering following soft data caused by bad winter weather. The Federal Housing Finance Agency’s house price index, an estimated value of housing market conditions, rose by 0.7%, equalling its largest monthly climb since July 2013. Existing home sales also surprised on the upside, increasing by 6.1% in March to 5.19 million. This marked its highest surge in growth in eighteen months. February’s sales were also revised upwards to 4.89 million as inventories improved, a sign of strength in the market ahead of the spring selling season. In other news, the historically volatile measure of mortgage applications showed that the number of applications increased last week by 2.3%.

More data surrounding the post-winter weather recovery will be released in the US this afternoon. Manufacturing sector growth and new home sales at 3pm will be preceded by weekly jobless claims at 1:30pm (all GMT).

Rest of the world

The Russian Ruble was the best performing currency in the world yesterday after the country’s Economy Ministry claimed interest rates could reach single digits this year. Russia’s interest rate is currently 14%, having been hiked aggressively in December following a decline in global oil prices.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.