The GBP is going to be volatile today, while USD/TRY may be looking for a retest of its highs. Read more!
2-0-7 - something new for the BOE
The Bank of England released an interest rate. As expected, it was left on hold at 0.5%. However, this time votes were divided: 7 members voted to keep the rate unchanged when 2 voted to hike. It can signal the rate increase in May. Moreover, the governor Mark Carney said that the prospects of excess demand over the forecast period, an ongoing tightening of monetary policy can support the inflation return to its target.
However, the statement contained mixed data. Let’s see.
- CPI inflation fell from 3.0% to 2.7% in February. And it is supposed to fall further, but it will stay above 2.0%.
- Pay growth continued to increase. And it is anticipated to rise further based on the tightening labor market. So growth in wages and unit labor costs will rise in the future.
- The unemployment rate stayed low.
- US GDP growth was weaker in the fourth quarter but the central bank sees indicators of exports and investment point to a stronger picture.
- Carney did not leave Brexit negotiations out of attention. According to the BOE’s release, Brexit will stay a source of uncertainty, weighing on households, businesses and asset prices.
Although we can anticipate a tighter monetary policy and soon rate hike, the Governor said nothing concrete. The statement was quite vague. Furthermore, investors anticipated the rate hike in May, so it did not become a surprise. As a result, the pound has weakened. If the greenback is able to recover, the sterling will fall further. The support lies at 1.4070.
Australia will publish the level of employment change and the unemployment rate at 3:30 MT on October 17.
The escalation of the US-China trade dispute and the Brexit uncertainties keep affecting the market. Read more!
The reports that the UK and the EU are close to complete a draft Brexit deal have pushed the British pound higher.