Top Story

EU FX Handover: BoE inaction

  • So, the Bank of England left interest rates and QE unchanged at 0.75% and £435bn respectively, in a 9-0 vote, as widely expected. The central bank raised growth forecasts for 2019, 2020, 2021, but cut its inflation forecasts for 2019 and 2020. Despite this, the BoE has signalled that MORE THAN 1 HIKE is needed to keep inflation in check. If you are confused, then you are not alone. The markets’ initial reaction suggests speculators were also left scratching their heads with those conflicting headlines. After an initial spike higher, the GBP turned lowed in a matter of seconds in reaction to the latest headlines. However, the selling pressure was mild, and lo and behold it was flat a few minutes later. The pound remains overall supported as we had suggested in the BoE preview article earlier. Ahead of Carney’s press conference, here are some key headlines from the BoE:
    • GDP estimate in 2019 +1.5% (Feb forecast +1.2%); 2020 +1.6% (Feb +1.5%) and 2021 +2.1% (Feb +1.9%)
    • CPI inflation in one year's time at 1.72% (Feb forecast 2.35%) and in two years' time at 2.05% (Feb 2.07%), based on market interest rates.
    • BoE reiterates that policy response to Brexit will not be automatic – it could be in either direction. The Bank also reiterated gradual and limited interest rate rises are needed to meet inflation target over forecast period.
  • Dollar flattish after yesterday’s FOMC decision. The markets were positioned for a more dovish meeting, but as the Fed was no so dovish, short-covering ensued.
  • AUD is the strongest currency despite metal prices coming under renewed selling pressure.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.