BoE Preview: Fresh Forecasts To Influence GBP/USD Outlook

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Trading the News: Bank of England (BoE) Interest Rate Decision

Fresh updates coming out of the Bank of England (BoE) may undermine the recent appreciation in GBP/USD if the central bank shows a greater willingness to preserve the record-low interest rate throughout 2017.

Why Is This Event Important:

With Silvana Tenreyro joining the Monetary Policy Committee (MPC), the new board member may side with the majority amid the mixed data prints coming out of the U.K. In turn, the BoE may largely endorse a wait-and-see approach over the remainder of the year as ‘the economy was expected to operate with a small degree of spare capacity for most of the three-year forecast period.’

However, Governor Mark Carney and Co. may adopt a more hawkish tone as ‘the inflation overshoot relative to the target could be more pronounced than previously thought,’ and a growing number of BoE officials may vote for a rate-hike as ‘the withdrawal of part of the stimulus that the Committee had injected in August last year would help to moderate the inflation overshoot while leaving monetary policy very supportive.’

Impact that the BoE rate decision has had on GBP/USD during the previous meeting

June 2017 U.K. Bank of England (BoE) Interest Rate Decision

GBP/USD 10-Minute Chart

The Bank of England (BoE) voted 5 to 3 to retain the record-low interest rate in June, with Kristin Forbes, Ian McCafferty and Michael Saunders voting for a 25bp rate-hike as ‘inflation was projected to overshoot the target by more than previously expected, and to remain above it throughout the three-year forecast period.’ Nevertheless, it seems as though the majority of the BoE remains in no rush to normalize monetary policy as ‘A slowdown in household consumption, and GDP as a whole, had recently begun,’ but a growing number of Monetary Policy Committee (MPC) officials may chance their tune over the coming months as ‘the withdrawal of part of the stimulus that the Committee had injected in August last year would help to moderate the inflation overshoot while leaving monetary policy very supportive.’ The British Pound gained ground following the growing dissent within the BoE, with GBP/USD climb back above the 1.2700 handle to end the day at 1.2751.