UK monetary policy will be under the spotlight amid concerns Mark Carney is about to shake up the status quo at the Bank of England after he took over as the new Governor earlier this week. The Monetary Policy Committee will announce its latest decision and sterling’s slow start may reflect concerns that Carney has, and will, introduce a more dovish policy agenda over the coming months. However, investors do not expect any changes from Carney just yet, particularly after robust UK services data showed the fastest growth in that industry last month for over two years. Nevertheless, concerns about UK monetary policy forced sterling to new one-month lows against the US dollar before the services news helped the currency rebound. The European Central Bank will also announce its latest monetary policy decision with the euro under continued pressure from Portugal’s political crisis. No policy change is expected but President Mario Draghi may offer markets plenty of guidance which should keep the single currency on the move.

Sterling

All eyes will be on London ahead of the Bank of England’s very first policy announcement under new Governor Mark Carney. No change to interest rates or quantitative easing is expected from the Monetary Policy Committee. However, concerns about Carney quickly introducing a change in policy strategy has weighed on sterling in recent weeks, pushing the pound down to new one-month lows against the US dollar.

US dollar

The US dollar added to recent highs after investors chose to focus on the positive employment component of US services data, which supported calls for the Federal Reserve to become less accommodative with its monetary policy. The short-term outlook for the US dollar remains attractive amid expectations of a more hawkish Fed while the European Central Bank may signal its willingness to deploy more monetary stimulus at its meeting.

Euro

Fresh worries about Portugal’s government forced the euro lower in front of the European Central Bank announcement, with political tensions in Lisbon threatening to unravel the country’s bailout programme. Budget disputes have forced top government officials to resign and should the troubles escalate and the country’s borrowing rates continue to spike, the euro could face a more meaningful examination. President Mario Draghi should cool investor anxiety about Portugal when he speaks following the ECB’s interest rate decision. No change in rates is expected but the euro could advance if Draghi delivers a reassuring statement about the eurozone economic recovery and the region’s debt markets.