Rally in pound stops ahead of the Bank of England meeting. This is because investors were anticipating if the central bank will announce a future increase in interest rates, all while making sure that economic growth will not be jarred.

Obviously, the recent jump in consumer prices indicates the need for action by the central bank, but apart from Chief Economist Andy Haldane, no one is stepping out to announce actions that would curb inflation. Perhaps, this is because the committee members are concerned that many citizens remain unemployed, or are on paid leave. The Bank of England had repeatedly mentioned that they will not stop stimulus measures until economic recovery is more robust.

But some analysts are already revising their projections, saying that rates may hike in 2022. For example, Credit Suisse said the Bank of England will increase rates next year, following the actions of the Federal Reserve.

Of course, there are also those who believe that rates will climb only in mid-2023. They said it will depend on how much the labor market recovers, so if the rise in unemployment is less significant at the end of this year, rates may really increase as early as 2022.

Today's Bank of England meeting is also the last for Haldane, as he is leaving to become chief executive of the Royal Society for Arts (RSA). Anyhow, even though he shares the optimism in the economic outlook of UK, he is very worried about inflation, which carries certain risks to the economy. He is the only one who raised the issue at the last meeting, but if other members join him today, a decision to change policy may occur, which will lead to another increase in pound.

But if the central bank once again takes a cautious approach to changing monetary policy, demand for pound may plunge. Negative assessments for the UK economy may also put pressure on the market.

Nonetheless, data released on Wednesday indicate that economic recovery is still strong, as composite PMI rose to 61.7 points in June, instead of the expected 62.8 points drop. The main reason is increasing activity amid softer COVID-19 restrictions and growing consumer demand.

But to be more specific, manufacturing PMI stood at 64.2 points in June, while service PMI reached 61.7 points. New orders also continued to grow, with notable increases in both sectors.

Going back to pound, a lot will depend on the base of the 40th figure, as climbing above it will result in a further increase towards 1.4050 and 1.4100. Meanwhile, a drop below the level will lead to a collapse towards 1.3930, and then to 1.3870 and 1.3800.

EUR

Euro continued to increase on Wednesday, thanks to strong PMI reports from the Eurozone. It even managed to hit a new weekly high, maintaining a bull market.

But today, a lot will depend on 1.1910 because dropping below it will result in a decline towards 1.1880 and 1.1845. Meanwhile, climbing above the level will lead to a further increase towards 1.2030 and 1.2105.

Unfortunately, the recent statements from the Federal Reserve are putting pressure on bullish traders, hindering them from setting off a new upward trend. Fed members Robert Kaplan and Rafael Bostic said the central bank may begin cutting back bond purchases very soon, as well as implement a rate hike next year.

Going back to the Eurozone, IHS Markit said the private sector grew at the fastest pace in 15 years, thanks to the reopening of the economy. Its latest data said composite PMI reached 59.2 points, which is a 180-month high. Service PMI also rose to 58.0 points, while manufacturing PMI climbed to 63.1 points. These figures set the stage for impressive GDP growth in the second quarter, which will be followed by an even stronger growth in the third quarter.

As for the US, the Department of Commerce reported on Wednesday that new home sales fell 5.9% in May, reaching only 769,000. On the bright side, the average remained at a record high of $ 374,400, up by 2.5% from April. The fall was not really surprising because more than a third of houses put up for sale were still under construction.