Like the European Central Bank, the Bank of England is expected to leave interest rates unchanged tomorrow.
Although they face inflationary pressures like the ECB and recent economic data including today’s service sector PMI was stronger than expected, their monetary policy statement should still contain a tinge of dovishness. UK growth faces more immediate risks than Eurozone growth which is why their bias should be different from the ECB’s and why the EURGBP hit an all time record high today. We expect this trend to continue as we believe that the monetary policies of the ECB and BoE lead to further EURGBP strength. As for the GBPUSD, the anticipation of a weak non-farm payrolls report on Friday could help keep the GBP/USD near its year to date highs.