All eyes on the Bank of England today, and how could a rate hike impact GBPUSD?

The markets are expecting to see an interest rate hike from the Bank of England (BoE) today, with some economists predicting that there is a 90% chance of the rate hike taking place.

Should the BoE voting members vote in favour of increasing the base rate, it won’t come as a surprise and for this reason the hike is perhaps already priced into the Pound’s value. I think that the movements for GBP exchange rates are likely to be driven by the comments afterwards, as the forward guidance from the BoE governor, Mark Carney afterwards is likely to be the most important talking point today.

Should there be a surprise and the rate hike not take place, then the chances of a sell-off in the Pound’s value is high, and I also think that if the rate hike takes place but the comments afterwards are bearish, we will also see the Pound fall. In the city Mark Carney is often labelled the ‘unreliable boyfriend’ as he has changed his mind in the latter stages before, so there could be a lot of movement today.

Last night the Fed Reserve Bank in the US opted not to hike interest rates, although the positive commentary has all but confirmed another interest rate hike from the Fed in September. This would leave the US base rate at 1.75% which is substantially higher than most other major economies. The US Dollar has gained a lot of value this year owing to the attractiveness of its returns, although this is a something that has frustrated Donald Trump as the hikes can make US exports less competitive.

Longer term I think how the Brexit unfolds will be the major mover for GBP/USD exchange rates, although in the short term it’s today’s BoE decision that’s dominating the markets.

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