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UK Interest Rate Decision 2 August 2018

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Barry Dumas
UK-INTEREST-RATE-DECISION

The Bank of England (BOE) monetary policy committee will be announcing their interest rate decision today at 13:00 South African time.

Inflation Report: The Bank of England (BOE) Inflation Report sets out a detailed economic analysis and inflation projection upon which the monetary policy committee bases its interest rate decisions.

Inflation being just one of the main drivers of the U.K monetary policy, the BoE will keep a close eye on the UK Consumer Index (CPI) as its been in a steady decline over the last 6 months back to the Bank of England’s target of 2.00% inflation.

Note: If we see the U.K inflation increase then we can expect the Pound (GBP) to weaken against all major currencies.

Interest rate:  The consensus is that The Bank of England (BOE) will raise interest rates by 25 basis points to 0.75% which will only be the second time since the financial crises that interest rates are to be raised.

Note: If we see the U.K interest rate increase then we can expect the Pound (GBP) to strengthen against all major currencies.

How it affects us here in South Africa

Over the last couple of months, we have seen pressure on Emerging Markets as talks of international trade wars initiated by the U.S with both China and the EU dominate most of the year.

If we see the Bank of England (BOE) monetary policy committee increasing interest rates -which is a 90% certainty it will add more pressure on the Rand (ZAR) as the Pound strengthens. We might see capital outflows as South African bonds will be less attractive as UK bonds will have a greater yield for less risk.

What to trade today:

International:

Major Forex pairs to look at will be GBP/USD, GBP/JPY, EUR/GBP

Major indices to look at will be the FTSE, DJ Euro Stoxx 50.

Exotic Forex pair will be USD/ZAR and GBP/ZAR. You can trade this via the NewwaveUSD ETN, (NEWUSD) and Newwave GBP Sterling ETN (NEWGBP)

Local:

Locally we have dual listed stocks that might be affected like Brait, Capital and Counties, Intu Properties and Mediclinic.

 

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