Bank of England Minutes Shows BoE Dale Joins in Call for Rate Hike
Bank of England policy maker Spencer Dale joined Sentance and Weale in voting for a interest-rate hike this month as members said that case for a tighter monetary policy had “grown in strength”. The minutes showed that “for three members, the case for removing some monetary stimulus at this meeting was compelling”. While Dale and Weale voted for a 25bp increase in the key rate off record lows at 0.50%, Sentence increased his call to a 50bp increase while Adam Posen maintained his vote to add 50 billion pounds to the bank’s asset purchase plan.
The more hawkish outcome of the minutes led the pound to rally against the dollar climbing just above 1.6270 but was unable to make any assault on the recent range highs at 1.6300. While sterling bulls driven by interest hike speculation have been in firm control for most of February but there are some clouds brewing on the horizon as public sector job cuts are expected to take their toll on consumer spending along with the higher VAT rate which was introduced in January. Therefore, unless bulls can press the Gbp/Usd pair higher through resistance at 1.6300 we may see this pair topping out and making a measured move lower as concern for UK fundamentals takes control of the market. However, we may well see that market players ignore some of the UK fundamentals and keep the pound relatively well bid since the Bank of England is widely expected to hike rates ahead of the ECB, Fed and certainly BoJ.
Written by Jonathan Granby, DailyFX Resarch Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.