GBPUSD, H1
The BoE left the repo rate and QE totals unchanged, as had been widely anticipated, but unexpected dissention in the ranks with two of the seven MPC members voting for a 25 bp hike. The repo rate remained at 0.5%, with the asset purchase target left at GBP 435 bln and the corporate bond target at GBP 10 bln. Members McCafferty and Saunders were the dissenters, basing their views on what they see as near zero spare capacity and accelerating wage growth, though the majority saw May has been a better time to see a full view of the economy. Sterling initially rallied on news of the hawkish dissention, but subsequently dipped with a closer look at the minutes showing some less than upbeat views on the MPC, with net trade and business investment noted as an area of weakness, bad weather seen as having a negative impact on Q1 growth, and U.S. tariffs greeted as an “unwelcome” development (although likely impact to be limited).The minutes still noted that pay growth will rise further, but terming the expected rise in unit labour costs a pick up “to target-consistent rates.”
Brexi-related uncertainty on households and businesses continued to receive a special mention. Overall, as the minutes note, an ongoing tightening policy “will be appropriate”, with all members agreeing that future tightening will be “at a gradual pace” and to a “limited extent.” We continue to expect a 25 bp rate hike at the May policy meeting.
Cable clocked a low of 1.4127, settling about 10 pips above here, after seeing a post-BoE high at 1.4222. EURGBP saw an inverse price action, dipping to a 0.8666 low, which is a new nine-month nadir, before rebounding above 0.8700. Cable is seen in process of establishing a range in the low 1.4000s, after rising from early-March levels near 1.3700.
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Andria Pichidi
Market Analyst
HotForex
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