s we mentioned earlier in the week, the chances of a rate increase at today’s meeting have taken a significant hit, following a string of disappointing macroeconomic news in the UK. Disappointing inflation, growth, wages and PMI data means that financial markets went from pricing in a near certainty of a hike to placing less than a 15% possibility an increase this month.

Currency traders will focus on the bank’s accompanying material, signalling whether a tightening in policy is off the table for the foreseeable future, or merely temporarily delayed. We expect an acknowledgement from Carney that economic conditions have worsened since the last meeting in March, while there is a good chance that we’ll see a downward revision in the 2018 growth forecast, although this may be largely priced in.

Risks to the Sterling are still skewed to the upside. UK inflation remains comfortably above target, while policymakers may deem the recent poor data as temporary, leaving the option open for a hike in August. Policymakers are not likely to take hikes off the table this year, as some forecasts have attached credence to. The key to the UK currency could be the nature of the vote, with another split vote likely to be supportive for the Pound. Regardless, the recent sell-off in the Pound looks slightly overdone.

US Dollar eases from multi-month highs

The Dollar’s relentless rally against its major peers took a breather on Wednesday, maintaining however, its strongest position, so far, this year.

A rise in US 10 year yields back above the psychological 3.0% level helped support the greenback, while offsetting some of the concerns over Donald Trump’s decision to pull out of the Iran nuclear deal on Tuesday evening. This was somewhat blunted by the fact that other members, including Iran, pledged to stay in the deal. On the macroeconomic front, US producer price data was soft, slipping to 2.6% year-on-year versus the 2.8% consensus, but had minimal effect on the market.

This afternoon’s US inflation data could hold the key for EUR/USD today, given a lack of meaningful announcements out of the Eurozone. Economists have pencilled in an acceleration in the headline measure to 2.5% for April, a confirmation which could provide fuel to the greenback rally.