Today, Wednesday, February 3, is the most important session of this week and one of the most important sessions of February for the currency markets, as the European Central Bank and the Bank of England meet today to determine monetary policy, and therefore the impact will be direct on the movements of the euro and the pound sterling.

Bank of England

At three o’clock Mecca time today, Thursday, the Bank of England will announce its monetary policy and interest rates, after the Bank raised interest rates in December by 15 basis points for the first time in three years.

. Markets are expecting and are now pricing in an opportunity of more than 85% to raise interest rates by 25 basis points to become 0.50% at the meeting next Thursday, in the first hike twice in a row since 2004, when the focus of the meeting is expected to be focused on high inflation and the Omicron effect.

The latest figures issued by the United Kingdom regarding inflation showed a rise in the CPI consumer price index to its highest level in 30 years at 5.4% in the annual reading in December, compared to 5.1% in the November reading, to move inflation away from the bank’s target of 2% and therefore requires the bank’s intervention to confront The impact of this rise on the economy.

Expected scenarios of movement

A quarter-point hike calculated in the current prices, and accordingly it is not expected that we will witness an interaction with it, except in the event that it is necessary to raise expectations, such as raising the bank’s expectations of inflation and indicating that the bank will continue to raise interest rates.

Surprising the markets and raising half a point in turn, may be enough for additional rises in the pound sterling. Not raising the interest rate, which is highly unlikely, but it remains a possibility that may cause strong pressure on the pound sterling during the session.

European Central Bank

Less than 45 minutes after the Central Bank of England meeting, the European Central Bank’s interest statement will be announced at 2.45 minutes Mecca time, followed by 45 minutes, the press conference of Central Bank President Christine Lagarde to find out what was discussed among the members of the bank of monetary policy, which is considered Unlike other central banks so far.

The European Central Bank, unlike the Bank of England and the Federal Reserve, sees so far that there is no urgent need to change the course and monetary policy, as Lagarde has confirmed more than once that she does not see an increase in interest rates before the first half of 2023 despite the continuous rise in inflation in the euro area.

Inflation figures released less than 24 hours before the bank’s meeting showed that inflation in the euro area rose to 5.1% in the estimated reading in January, up from 5% in December, while expectations indicated a decline to 4.4%.

Movement scenarios

for the EUR The markets have started buying the euro since the beginning of the week, to rise by more than 150 points against the US dollar, reflecting that there are high expectations that Lagarde will change its expectations regarding interest rates, especially after inflation figures yesterday, and therefore any indication from Lagarde that we may witness a rise by the end of this year will extend the gains The euro and vice versa, if it continues to refuse and that high inflation is only a temporary rise and that there is no need to rush to change monetary policy, the euro will decline strongly.