The Pound may spike higher today if the Bank of England governor’s “Super Thursday” speech and monetary policy include a suggestion of raising interest rates in the future. Rising core inflation has been steadily moving past the Bank’s target rate of 2%. However, the central bank is likely to be very cautious about rocking the boat by making any monetary policy changes as the UK economy slows down.

The US Dollar has been sliding against Sterling and the Euro since President Donald Trump fired FBI director James Comey. The investigation into Trump’s presidential campaign’s ties with Russia threaten to derail his administration’s plans for reform and fiscal stimulus.

Pound Sterling – UK Markets

On “Super Thursday” the Pound is expected to be volatile against the Euro, as the first quarter inflation report from the Bank of England (BoE) will be released. The exchange rate is floating between €1.18- €1.19. The report is released twice a year and is considered a market-mover. The BoE forecasts inflation and the economic conditions for the next two years. According to some analysts, the BoE will predict a slowing down of the economy, which will weaken the Pound against the Euro in the short-term.

The report will be announced at the same time that the BoE’s Monetary Policy Committee (MPC) will hold its meeting on interest rates. In February, the committee decided to keep the interest rates unchanged, and city experts are predicting that the committee will likely vote to leave them as they are, at a current low of 0.25%.

Sterling remains stable at $1.29 against the US Dollar. According to some analysts, the Pound is unlikely to keep its strength. On Wednesday, Intesa Sanpaolo bank said that it predicts that the British currency will drop to $1.20 - $1.24 in the next three months. “The likely mounting of tensions with the EU over Brexit as soon as negotiations begin leaves Sterling exposed to a retreat,” Luca Mezzomo, the bank’s chief economist commented. However, in the long term, experts believe Sterling will gain back its strength, going higher than $1.30 within a year.

US Dollar – US Markets

The US Dollar recovered against the Yen reaching an eight-week high at ¥114.31. However, the currency remains unstable against the Pound and the Euro. The US Dollar is trading at €0.91 and £0.77.

In the aftermath of the FBI director Comey’s firing, many investors are still insecure about President Trump’s decision, which might lead to political instability, derail the tax reform and the US stimulus programs in education, health and social security. Nevertheless, the US Dollar is expected to stay within the current levels, protected by the latest Federal Reserve’s positive report. Most analysts are forecasting an increase in the interest rates at the next meeting of the American central bank in June.

Euro – European Markets

Euro to US Dollar exchange rate remained stable at $1.08. The single currency faced some pressure earlier because of Mario Draghi’s comments during a hearing in the Dutch Parliament.

Pressed by Dutch lawmakers on when he will start winding down Eurozone monetary stimulus, he replied that it is still too soon to consider that, despite improving economic data. Draghi’s voluntary appearance wasn’t a walk in the park since he was asked multiple times about the possibility of a Eurozone government restructuring its debt or exiting the currency bloc. The president of the ECB, nicknamed “Super Mario”, stuck to the script saying that the Euro is “irrevocable” and it’s not the time for speculation.

Draghi reiterated his concern that falling unemployment has yet to boost wage growth. An ECB report says that the Eurozone’s unemployment level has been the lowest in eight years. In theory, low unemployment should have helped to push up wages, but this isn’t the case in the EU. Researchers from the Bank of America Merrill Lynch found that most of the jobs created were of “deteriorating quality”. This fact, combined with inflation, represent two of the biggest challenges for Draghi.

Other Currencies – Highlights

Sterling rallied against the New Zealand Dollar with the rate set at 1.88 NZD. The Pound gained 1.32% in value, while the Kiwi to US Dollar exchange rate suffered its biggest one-day loss since June 2016. The Kiwi was affected by the Reserve Bank of New Zealand announcing that it will keep its interest rates at 1.75% and affirming the bank’s neutral position on leaving the rate unchanged until September 2019. The announcements were greeted with scepticism by economists and investors.

The Pound gained a bit of ground against the Australian Dollar, setting the exchange rate at 1.75 AUD. The Aussie recovered some of its past days’ losses against the US Dollar, assisted by the increasing price of copper, which often boosts demand for commodity-linked currencies.

Sterling to Canadian Dollar exchange rate was driven upwards by 0.4%, set at 1.77 CAD. The Loonie, as the Canadian currency is nicknamed, lost value because of Moody’s downgrading the long-term ratings of 6 Canadian banks. Moody’s reported that the reason is the continued growth in Canadian consumer debt, which could lead to a deterioration in the banks’ asset quality.