News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • Heads Up:🇷🇺 CBR Press Conference due at 12:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-10-23
  • Heads Up:🇩🇪 Bundesbank Mauderer Speech due at 12:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-10-23
  • The Spinning Top candlestick pattern forms part of the vast Japanese candlestick repertoire with its own distinct features. Gain a better understanding of the spinning top candlestick here: https://t.co/yXomAftdv8 https://t.co/9N3XRViUin
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.61%, while traders in EUR/USD are at opposite extremes with 69.17%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/4I6evWndsv
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here: https://t.co/aVAzFypAg1 https://t.co/afeXKfZT4K
  • 🇷🇺 Interest Rate Decision Actual: 4.25% Expected: 4.25% Previous: 4.25% https://www.dailyfx.com/economic-calendar#2020-10-23
  • Commodities Update: As of 10:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.43% Gold: 0.29% Silver: 0.05% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/joUZve1zxA
  • Forex Update: As of 10:00, these are your best and worst performers based on the London trading schedule: 🇦🇺AUD: 0.44% 🇳🇿NZD: 0.36% 🇨🇭CHF: 0.32% 🇯🇵JPY: 0.20% 🇨🇦CAD: 0.17% 🇬🇧GBP: 0.02% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/jitwr50kLY
  • Heads Up:🇷🇺 Interest Rate Decision due at 10:30 GMT (15min) Expected: 4.25% Previous: 4.25% https://www.dailyfx.com/economic-calendar#2020-10-23
  • Indices Update: As of 10:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 1.38% France 40: 1.05% Germany 30: 0.78% Wall Street: 0.26% US 500: 0.22% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/T1eJUg4Xb4
British Pound Tumbles on Dovish Rate Increase by Bank of England

British Pound Tumbles on Dovish Rate Increase by Bank of England

Share:

Talking Points

- The Bank of England has raised UK Bank Rate to 0.5% from 0.25% as almost unanimously expected.

- However, the British Pound fell back in response to what was seen as a “dovish hike”, with any further increases likely to be gradual and limited.

- Retail traders turn bearish on the Sterling, which is good news for GBP/USD according to the IG Client Sentiment index.

What Does the Fourth Quarter Hold for the Pound, Oil, Equities and Other Key Markets? Find out here with the DailyFX Trading Guides

Updated with Commentary

The British Pound pressed to fresh session lows against the Euro and US Dollar during BOE Governor Mark Carney's press conference, in which the dovish tones of the tightening decision were fleshed out.

Carney said that the rate hike decision was "straight forward" as inflation was unlikely to "return to goal" (+2% over the medium-term) "without hikes." With "domestic CPI pressures likely to build in [the] coming years," Carney noted that the "time has come" for the BOE to take its "foot off the accelerator." That was about it for the positivity, however.

Noting that "these are not normal times" for the UK economy given the uncertainty surrounding Brexit, Carney said that "Brexit-related constraints [are] adding to [the] drag on potential," calling Brexit "the biggest determinant for [the] economic outlook."

Accordingly, Carney called the policy move today only a "modest adjustment in interest rates" and that only two hikes are expected through 2020. Finally saying that the Brexit deal could mean a "recalibration of BOE policy," it was clear that Carney and the rest of the Monetary Policy Committee don't necessarily believe that this is the beginning of a rate hike cycle.

Original Note

The Bank of England has doubled UK Bank Rate to 0.5% – the first increase for more than a decade – but the British Pound fell back sharply in response to what was seen as a “dovish hike”. The decision was almost unanimously expected, as were the bank’s decisions to leave its program of UK government bond buying at £435 billion and its corporate bond purchases at £10 billion.

However, the Pound was weakened by news that two of the nine members of the bank’s monetary policy committee voted against the increase, preferring to leave rates unchanged. Moreover, the bank said any further increases would be “at a gradual pace and to a limited extent”.

The economic outlook, it added, was “broadly similar to August” while “considerable risks remain”, including those connected with Brexit.

Meanwhile, the bank’s quarterly Inflation Report shows inflation in one year’s time at 2.37%, down from 2.58% in August, and its prediction for economic growth in 2017 at 1.6%, down from August’s 1.7%.

Bank of England Governor Mark Carney, at a press conference to explain the latest developments, said the sheer novelty of a first rate hike created some uncertainty about its impact on the economy but there was no reason to expect it to be larger than normal. Indeed, he added, inflation pressures are likely to build.

In the markets, the British Pound dropped steeply against the US Dollar and suffered its biggest daily loss against the Euro in three months. UK government bond yields fell sharply and London share prices jumped.

Chart: GBP/USD Five-Minute Timeframe (November 2, 2017)

British Pound Tumbles on Dovish Rate Increase by Bank of England

Chart by IG

Read more: Asymmetric Risk Ahead for British Pound as BOE Weighs Rate Hike

--- Written by Martin Essex, MSTA, Analyst and Editor, and Christopher Vecchio, CFA, Senior Currency Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES