Bank of England Leaves Rates Unchanged, Sterling (GBP) Remains Supported
Bank of England, Brexit and Sterling (GBP) Talking Points:
- Bank of England leaves all monetary policy measures unchanged.
- Quarterly Inflation Report highlights mixed inflation outlook.
The DailyFX Q4GBP Forecast is available to download.
Bank of England – Steady as She Goes
The UK central bank left all monetary policy settings unchanged Thursday – 9-0 vote –and said that future interest rate hikes would be limited and gradual. The BoE said Q3 saw Q3 UK GDP at 0.6%, slowing to 0.3% in Q4 while the 2019 GDP forecast was cut to 1.7%, the same level as 2020 and 2021. In a slightly hawkish twist, the central bank added that the output gap has closed, and that the UK economy may run hot from late 2019. Wage projections rose to 2.75% in Q4 2018, 3.25% in Q4 2019 and 3.5% in Q4 2020.
Inflation projections were mixed with one-year at 2.10%, down from 2.15% at the last forecast, two-year inflation at 2.12%, up from 2.09% and three-year inflation at 2.03%, unchanged from the last forecast.
Sterling remained near its best levels of the day, aided by headlines that the EU and UK had reached a tentative agreement of financial services, a story that was later dismissed, but not out of hand.
GBPUSD Daily Price Chart November 1, 2018
Sterling is up over 2 points against a slightly weaker US dollar over the last 24 hours and is back at levels last seen one week ago. The pair continue to trade below all three moving averages and will remain volatile as Brexit headlines dominate market thinking.
IG Client Sentiment data show that retail investorsare 79.4% net-long GBPUSD, a bearish contrarian indicator. However, recent daily and weekly shifts in sentiment give us a strong GBPUSD bearish bias.
--- Written by Nick Cawley, Analyst
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