Yet again, 6 out of 9 MPC members voted to leave the rates unchanged. With no new member voting for a hike, and a mention that the market expects a hike only in the middle of the year, the moves seems to be getting further away. GBP/USD reacts with a significant drop.
Andrew Sentance, Martin Weale and Spencer Dale want a rate hike. Sentance even voted for a 0.50%, not for the first time. But they’re still only 3 out of 9. Inflation isn’t too worrying for the rest of the members.
GBP/USD now trades at 1.6325, losing around 50 pips after the release. Support is found at the 1.6280 – 1.63 region. The rally seen in the past day or so has been broken, at least for now.
Mervyn King continues to enjoy a solid majority that is reluctant to raise the rates in the current situation of the British economy, still struggling with high unemployment and a problematic housing sector.
The minutes contain a clause about market expectations for a rate hike:
Short-term sterling interest rates had changed little over the month as a whole and had continued to indicate that market participants expected Bank Rate to increase by 25 basis points around the middle of the year.  Within the month, however, yields had reacted to a range of data releases and news.
This mention of market expectations hints that a hike will probably not be seen in May, but rather pushed back to June or July. This weighs on GBP/USD.
Yet again, the members of the MPC decided to leave the interest rate unchanged at 0.50%. This publication happened on April 7th, the same day that the ECB raised the rate for the Euro zone. GBP/USD reacted with a fall then.
The recent inflation figures showed that inflation is winding down, at least regarding the more important figure – consumer prices. After it already reached an annual pace of 4.4%, and was expected to remain at this level, it surprised by easing to only 4%, putting off some of the pressures for a rate hike. It’s important to note that these figures were published after the rate decision.
Earlier this week, the pound took a serious dive and went as low as 1.6160, before bouncing back up. After a struggle with the 1.6280-1.63 region, cable pushed forward but fell short of the 1.64 line. It traded at 1.6376 before the release.
Lines above are 1.64, 1.6450 and 1.6515 on the upside, and 1.6280, 1.6110 and 1.60 on the downside. For more levels and technical analysis, see the GBP/USD Forecast.
