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GBP to face a landmark week ahead of BoE decision

03 May 2021

Ahead of a “landmark week,” the GBP/EUR market rate is being traded at 1.1504. On Thursday, the Bank of England will announce its decision as to whether the pair will be released from a persistent if-not apprehensive observance of the 1.15 threshold. 

The British currency failed to sustain a move higher and will be hindered by the BoE’s decision this week. ING’s chief EMEA strategist for currencies and interest rates, Petr Krpata said, “Although the Scottish elections may bring some negative headline news about another Scottish independence referendum, we don’t think this should have an overly negative impact on GBP.” 

On the other hand, Brent Donnelly, a spot FX trader stated that he does “not believe the event is important, but the market might care for a few days.” Traders also noted that the "risk premium" only started weighing on the Sterling six months before the referendum. 

Close to 2021 lows is the Pound-to-Canadian Dollar pair, trading at 1.7050 at the time of writing. The BoE’s decision is also a factor, giving the Pound a tough road against the strong Canadian Dollar. As a result of the Loonie’s performance, the USD/CAD pair fell to its lowest since January 2018 on Friday. “We could see some profit-taking curbing further upside in the short term, but in the medium term the widening CAD-USD rate advantage thanks to the hawkish BoC (and so far unchanged stance by the Fed) along with a still solid domestic recovery narrative in Canada all point at further downside risk for USD/CAD,” ING strategists claimed. 

Moreover, the EUR/USD spot rate was at 1.2047, appealing for dip buyers to save its previous recovery. The Euro was impacted by last week’s short-lived increase in U.S. yields, month-end routines for stock market investors as well as the final day of trading.