Bank of England Analysis & Talking Points
- BoE Leaves Interest Rates Unchanged
- UK GDP Forecast Lowered
- GBP/USD Sees Muted Reaction, Politics the Main Driver
BOTTOM LINE
The Bank of England left its monetary policy tools unchanged with a 9:0 vote as expected. Unsurprisingly, the monetary policy statement was largely a reiteration from the prior month with the central bank continuing to highlight that rate rises will be gradual and limited provided that there is a smooth Brexit and a recovery in the global economy. Consequently, given that outlook regarding the future relationship between the UK and EU remains unknown, the Bank of England are forced to sit on their hands and enforce a wait-and-see approach. Elsewhere, in light of expectations that Article 50 will be extended to the end of January 2020, the BoE noted that political events could lead to a further period of entrenched uncertainty, resulting in demand growth remaining below potential.
BoE staff forecasts slightly downgraded their UK GDP projections to 0.2% from 0.3% in the August report, while the BoE also sees inflation remaining below the 2% target throughout the remainder of the year amid the base effects from energy price caps.
Overall, UK assets were relatively unchanged with GBP/USD hovering around pre-announced levels, while UK 2yr gilt yields dipping a meagre 1bp and the FTSE 100 seeing a marginal lift. That said, UK politics remains the key driver of UK asset classes.
GBPUSD PRICE CHART: 1-MINUTE TIME FRAME (INTRADAY September 19, 2019)
FTSE 100 PRICE CHART: 1-MINUTE TIME FRAME (INTRADAY September 19, 2019)
For a more in-depth analysis on FX, check out the Q3 FX Forecast
--- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.mcqueen@ig.com
Follow Justin on Twitter @JMcQueenFX
