gbp fundamentals

British Pound Outlook May Hinge on the Bank of England's December Meeting Minutes

Wednesday, 17 December 2008 00:19:10 GMT  |  Terri Belkas, Currency Strategist

The UK consumer price index (CPI) fell less than expected during the month of November at a rate of -0.1 percent, while the annual rate eased to 4.1 percent from 4.5 percent. While this is still well above the Bank of England’s 2.0 percent target, BOE Governor Mervyn King said this morning that CPI will likely meet it during the first half of 2009, but fall “materially below it later in the year,” and perhaps even below 1 percent. Mr. King also said that the Monetary Policy Committee (MPC) will “continue to take whatever actions are required to ensure that the outlook for inflation remains in line with the Government's 2 percent target.” Looking ahead to the next 24 hours, the minutes from the BOE’s December policy meeting will provide one of the best gauges of where interest rates will go next. During this meeting, the BOE’s Monetary Policy Committee slashed the Bank Rate by 100bps to 2.00 percent, as expected. The key will be to watch the vote count, as a unanimous decision to cut rates and indications that the MPC sees the need for additional rate cuts in the future could lead the British pound to pull back sharply. However, traders should also beware that UK jobless claims will hit the wires at the same time, and they could exacerbate any bearish impact on the British pound from the minutes as claims are forecasted to rise for the tenth straight month and by the most since December 1992.

Related Article: British Pound Weekly Forecast

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