Summary:
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BoE vote 9-0 to keep base rate at 0.75%
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Move inline with forecasts but message a little more dovish
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Selling seen in GBP in immediate reaction
The Bank of England have voted unanimously to keep their monetary policy unchanged with the base rate remaining at 0.75% following their latest meeting. Compared to the high drama of President Draghi’s remarks earlier this week and the Fed’s dovish turn yesterday evening the market reaction has been relatively subdued. Having said that, there has been some selling seen in the pound with rate setters acknowledging a slowdown in economic growth and also stating that the chances of a no-deal Brexit have risen.
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The pound has dropped by around 35 pips against the US dollar since the news broke, with the pair moving back below the $1.27 handle. Source: xStation
Selected comments from the statement are as follows:
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Q2 GDP estimate cut to 0.0% from +0.2% prior
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Increasing signs that wage growth rates might have levelled off
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Underlying economic growth appears to have weakened slightly in 1H 2019
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Downside risks have increased since May as global trade tensions intensify
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Perceived risks of a no-deal Brexit have risen
On the whole the message is following the theme set by the bank’s peers in recent days by turning more dovish and while Governor Carney and the MPC have stopped short of delivering as strong a signal as the ECB or the Fed, it does seem increasingly likely that the next move will be an interest rate cut rather than a hike.
The EURGBP has recovered since the decision broke with the pair back at the 0.89 handle. Recent highs of 0.8975 remain potentially key resistance with the market now in between the 8 and 21 EMAs after finding support at 0.8875. Source: xStation
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