The U.S. and the U.K.’s central banks will hold their monthly sessions this week to decide where to set key interest rates. Investors worldwide will be watching these key events closely as they can significantly affect USD and GBP pairs*
The EUR/USD climbed after the U.S. Federal Reserve voted to leave rates unchanged at 1.25% last month, highlighting “solid” economic growth. This left room for another rate hike in December, with analysts claiming that a rate hike is highly likely this month, pricing in the odds at 100%, according to Investing.com’s Fed Rate Monitor Tool.
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As expected, the Bank of England increased interest rates in November, marking the first rate hike in the last decade. Specifically, the BoE increased the benchmark interest rate from a record low of 0.25% to 0.50%, effectively reversing the last rate cut after the Brexit referendum. However, the rate hike was widely anticipated, which led to a sterling sell-off and caused the EURGBP to rally.
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What do the analysts expect this month?
Release Forecast* Previous*
FED Interest Rate Decision 1.50% 1.25%
BOE Interest Rate Decision 0.50% 0.50%
*Table source: investing.com
How might the Forex Markets be affected?
A generally hawkish stance and a higher-than-expected key interest rate can be considered positive/bullish for USD and GBP pairs.*
OR
A dovish monetary outlook and a lower-than-expected rate will have a negative/bearish effect on USD and GBP pairs.*