Only one member, Ian McCafferty, changed his mind and voted for a rate hike in the UK. This was less than 7:2 expected. The road to a UK rate hike seems long. It is now seen coming at June 2016 instead of May 2016 – far away in any case. The minutes and the inflation report also reveal a darker picture, that clearly contradicts the bullish comments from Carney.
GBP/USD falls sharply, from around 1.56 to 1.5540. Update: the fall extends to 1.5490. “Super Thursday†is a “Super Blow†for sterling.
The MPC meeting minutes also reveal:
- There was a range of views regarding hiking the rates (apparently only one wanted a hike).
- They are also worried about the strength of the pound, hinting about it by mentioning the “persistent CPI impactâ€
The interest rate and QE policy were left unchanged as expected. The Bank of England also released its inflation report:
- GDP growth forecasts have been raised
- But the fall in energy prices is likely to weigh on inflation
- Inflation forecasts have been pushed down for 2016 but stable for 2016.
Here is a quote from the long report about the pound:
The support to UK exports from steady global demand growth is expected to be counterbalanced, however, by the effect of the past appreciation of sterling
The pound is also falling against other currencies:
- EUR/GBP tops 0.70 and trades at 0.7030.
- GBP/JPY plunges to 193.50.
- GBP/CAD is at 2.04.
Markets had expected no change in policy (interest rate at 0.50%, QE at 375 billion) but they did see a change in the voting pattern: whereas 2 out of 9 members would opt for a rate hike at this time.
GBP/USD traded around 1.5610 towards the publication after wobbling around that level also after the OK manufacturing data. Tension was high toward the event.
The simultaneous release of the rate decision, the meeting minutes and the Quarterly Inflation Report (QIR) was dubbed by some as “Super Thursday†for pound traders. The immediate reaction depends on the voting patterns in the MPC Meeting Minutes, while the next moves depend on the message coming from the Bank and its governor.
We still have a press conference coming from BOE governor Mark Carney. The Canadian governor of the BOE recently made it clear that rate hikes are coming sooner.
Here is coverage of Carney – he is “data dependentâ€
The pound has recently outperformed many of its peers due to this hawkishness, but Carney will likely raise rates only after the US Federal Reserve makes the first move.
More: GBPUSD May Face Resistance Around 1.5700, GBPJPY Moving Towards 196.00 – Elliott Wave Analysis
