The UK Monetary Policy Committee remained unanimous on its decisions. No member voted for a hike, not this time. However, some members say that the danger of a rate hike derailing the recovery has receded. This is a hawkish note.
GBP/USD was moving higher towards the publication, reaching above 1.7090 from around 1.7060 earlier in the day. The pair is now erasing its gains – a “buy the rumor, sell the fact†move, but the pair doesn’t fall too much. as the pound stabilizes at 1.7075 after a drop to 1.7060.
The BOE expects a slowdown in growth during the second half of the year. They see weakness in wages, and this may imply a higher level of slack. They are not wary of inflation and are surprised by the muted response of markets to geopolitical events.
Regarding the pound, the MPC notes that the rise of the currency reflects relative UK performance. No worries here.
There was some speculation that we would see one or two dissenters today, voting for a rate hike. However, the consensus stood on a unanimous vote to keep the interest rate unchanged at 0.50%, the place it stands at since early 2009. The QE program was also expected to remain unchanged at 375 billion pounds.
Martin Weale has been singled out as a potential dissenter. Also Spencer Dale and Kristin Forbes are candidates. So far, BOE governor Mark Carney enjoyed a unanimous MPC in his reign. He will speak later on, at 11:45 GMT.
1.7050 provides weak support, followed by the round level of 1.70. Resistance awaits at 1.7120. For more, see the GBPUSD prediction.
In addition, the BBA released its mortgage approvals for June, which stands at 43.3K after 41.8K in May.
