The EURGBP rate is 0.23% lower in early trading on Wednesday as the market awaits the latest monetary policy and interest rate announcement from the Bank of England. Stronger PMI data from the British manufacturing sector helped to spark further gains in sterling as the country moves towards a further reopening of its economy. Scottish elections are also tomorrow and the SNP look to be missing out on a majority which has also boosted the pound.
EUR to GBP is heading for support levels at 0.8600 with the pair trading at 0.8630.
SNP could lose out on a majority
The SNP party in Scotland are set to miss out on a majority by six seats at the Scottish elections tomorrow, according to new polls. The result would see the party return 59 MSPs, which would be four less than last time, 65 needed for a majority.
The newest survery by Savanta ComRes sees the SNP securing 42% of the constituency vote and 34% of the list vote. Despite this, there could still be a pro-independence majority with the Scottish Green party expected to secure nine MSPs, which would be three more than in 2016. The latest poll also said that support for Scottish independence is still split, with 50% planning a “No” vote if a referendum were to be held tomorrow.
Other polls put the SNP on a majority, but the independence situation will not change. The UK public is tired of these same talking points and after the last year, it would be the wrong time to restart the arguments. The EUR to GBP has moved lower with the potential for a drop in SNP control and the sterling gains will hang in the balance until the votes are cast.
BoE to reverse QE?
Tomorrow sees the latest interest rate and monetary policy statement from the Bank of England and traders are keen to find out the potential for a tapering of stimulus measures. The UK economy has been strong and analysts don’t see the need for large-scale bond buying.
The bank will hold its key interest rate steady at 0.1% but the bond buying trajectory will be key for the pound and euro. ING bank has said that tightening is unlikely before 2023.
The bank said: “For now, we doubt any form of tightening will happen before 2023 based on our current outlook. But it’s conceivable that announcement on balance sheet reduction could come early into any interest rate hike cycle – and maybe even before.”
“We’re pencilling in one, maybe two rate hikes for 2023, along with a gradual introduction of balance sheet reduction at some point in the year,” the report added.
The EURGBP has surrendered the 0.8700 level and is looking to try support levels at 0.8600 with the yearly lows being below 0.8500. The BoE announcement may not provide any real surprises, but a failure of the SNP to gain a majority would stifle the independence push and see gains in the British currency.