No surprises from the BOE: a unanimous decision to leave rates unchanged. The BOE did mention the risks of a Brexit: it adds to uncertainty. They were dovish also by saying that there are headwinds and that the uncertainty may already weigh on growth in the first half of 2016. While the Bank of England is in theory neutral over the referendum, it seems they have a clear opinion against the UK leaving the EU.
GBP/USD wobbled around but basically did not go anywhere.
The Bank of England left the interest rate unchanged at 0.50% as expected and as it has been since March 2009. That was no surprised. The key is the tone of the meeting minutes. Before the announcement, there were rumors that two members of the Monetary Policy Committee were actually about to vote for a rate cut. It came from Ed Conway from Sky News and would seem surprising to use this tool now and not wait for the actual Brexit, that may or may not occur.
BOE Background
GBP/USD traded around 1.1430 towards the announcement. The pound did enjoy better than expected inflation figures earlier this week as well as a rebound from the doom and gloom around a potential “Brexit” as well as the fallout from David Cameron’s implications around the Panama Papers. However, with the re-strengthening of the US dollar, the pound was one of the worst-hit currencies out there.
The UK economy is showing some signs of slowing down. Manufacturing remains the weakest link and a widening trade deficit is also of worry.
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