Bank of England and ECB meet today as markets await future monetary policy

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The US Dollar didn't have the best of days yesterday as a number of currencies rallied against the US Dollar and have managed to hold onto those gains this morning. Today's Bank of England meeting will have a big impact on whether Sterling can hang on to the cent gain it made.

It is a near-certainty the Bank of England monetary policy committee will keep interest rates on hold at 0.5% for the 27th consecutive month. We won't know for two weeks what the voting split will be and that will probably weigh on Sterling until, and probably after, the publication of the minutes from the meeting.

For many months MPC member Andrew Sentance has voted for an interest rate rise of 0.5% but his term on the MPC finishes at the end of this month and nobody is sure who will be the new advocate for higher interest rates. It could be, as some economists believe, that interest rates will still be at 0.5% in 18 months time.

The European Central bank also meets today and is equally likely to decide against an interest rate increase but the debate there will be more about when. The press conference after the ECB announcement will be closely monitored to see if the next rate hike will be in June or July.

The reaction on the foreign currency exchange markets remains to be seen.  To date, investors have been selling Sterling and buying into the Euro due to rising interest rates. There is no guarantee that will continue today despite UK house prices falling, low numbers of mortgage approvals and a weaker construction sector purchasing managers' index yesterday, Sterling didn't really suffer too much. Is it possible that Sterling has bottomed out against the Euro and will start to recover?

Sterling is down by half a Japanese Yen and quarter of a Swiss Franc but is unscathed elsewhere. Against the Australian Dollar, Sterling actually managed a two cent rally after Australian retail sales went down by 0.5% yesterday.

It wasn't just UK and Australia that released poor data yesterday as Eurozone services PMI and retail sales were below forecast. It seems the only positive data was from the New Zealand where unemployment fell from 6.8% to 6.6%.

Sterling's fortunes today will be down to the Central Bank and the services PMI. Have a good day.