The Bank of England (BoE) takes centre stage in a few hours, releasing its monetary policy decision along with the meeting minutes and its quarterly inflation report. As widely expected, the central bank is likely to leave interest rates unchanged, although investors will expect the inflation report to show higher inflation and growth forecasts. Following the policy decision, BoE Governor will speak at a press conference and will be watched for any further cues on policy tightening. The fresh out data from the UK showed that British construction activity slowed to its weakest level in 5 months in January.

Moving on to another central bank, the US Federal Reserve (Fed), kept the benchmark interest rate steady at its monetary policy meeting yesterday, on the back of slowly rising US inflation and solid job market. The central bank remained upbeat about the US economy and suggested that it remains committed to tightening monetary policy.

Pound Sterling – UK Markets

The British Pound is trading at a seven-week high against the US Dollar this morning. The just out data showed that British construction output grew at its slowest pace since August in January. Market participants now look ahead to the Bank of England’s monetary policy decision scheduled in a few hours. Accompanying the interest rate decision will be the inflation report and meeting minutes. As the BoE is expected to maintain status quo on its policy measures, it’s the inflation report, projecting the bank’s growth and inflation outlook that will attract market attention. Investors will expect the bank to raise its inflation and growth forecast, following rising UK consumer price inflation and robust economic performance post the Brexit vote. Later, BoE Governor, Mark Carney’s press conference will be studied for any further cues on the central bank’s future stance.

Yesterday, British manufacturing output rose at the quickest pace in 32 months in January, as growth in new orders was supported by domestic demand.

US Dollar – US Markets

Yesterday, the greenback ended higher against the shared currency and lower against the Pound. As widely expected, the US Fed kept its key interest rate unchanged in its first policy meeting since Donald Trump took over as the President. In its statement following the meeting, the central bank pointed towards the improving consumer inflation and labour market conditions in the nation, signalling that it remained on course for further rate increases this year. On the release front, the ADP, in its monthly report, indicated that private sector employment registered strongest growth in January, with the highest increase since June 2016. Meanwhile, the ISM manufacturing PMI advanced for the fifth consecutive month in January, notching its highest level since 2014, however, the Markit manufacturing PMI rose slightly less than consensus in the same month. In other news, mortgage applications decreased last week, posting its first decline in four weeks.

Today, investors will focus on flash non-farm productivity for 4Q 2016 along with weekly jobless claims data for further cues in the greenback.

Euro – European Markets

This morning, the Euro is trading higher against the greenback and Sterling. Earlier in the session, macroeconomic data showed that the Spanish government added less than anticipated number of unemployed workers during the previous month. Ahead in the day, the dynamics in the Euro will be determined by the Eurozone produce prices data for December which is estimated to register a solid increase in the same month. Additionally, the ECB President, Mario Draghi is scheduled to speak at the joint ECB/Bank of Slovenia conference in Ljubljana. Moving forward, investors will keep a close watch on services sector data across the Euro zone for January along with the Eurozone’s retail sales data for December, slated to release tomorrow.

Yesterday, the shared currency ended weaker against its major counterparts, after mixed manufacturing sector data across the Eurozone soured investors’ sentiment. While the Euro zone, French and Spanish manufacturing PMI registered robust growth in January, the German and Italian indices posted not so good print in January.

Other Currencies – Highlights

The Japanese Yen has reversed its losses and is trading on a stronger footing against the greenback this morning. Earlier in the session, data released by the Cabinet Office showed that Japan’s consumer confidence index advanced in January, registering its highest level since September 2013. During the previous session, the nation’s manufacturing activity expanded at the quickest pace in almost three years in January. The manufacturing sector kicked off the new year on a positive note amid robust export orders and marked a fifth straight month of expansion. Additionally, Japan’s monetary base rose on an annual basis in January. Separately, Japan’s Prime Minister, Shinzo Abe defended the nation and stated that it was not deliberately devaluing the Yen. The comments came after newly elected US President, Donald Trump accused Japan of manipulating forex markets.

Today, market participants will keep a tab on the Bank of Japan (BoJ), as it releases the minutes from its December policy meeting. Markit services PMI set to release tomorrow will sign off this week.