Sterling Rallies On Bank of England Report

Yesterday we saw the pound fair better than in previous days following the release of the Bank of England MPC report.

Earlier in the day EU inflation figures all came out as expected giving investors little to buy in to alongside the Swiss National Bank who held their interest rates at negative 75 basis points, as expected. We had to wait until lunchtime for things to get interesting as the pound spiked up on the Bank of England’s monetary policy report at midday.

In a surprise result, the vote to tinker with interest rates, having been unanimous to keep unchanged in previous months, showed one member voted for a rate hike, as inflation was seen as moving above the preferred 2 percent level in the coming months. Kristen Forbes, a member who is leaving the MPC in a couple of months, holding little sway, felt inflation warranted a hike vote. Mark Carney, however, stated he didn’t see inflation as anything to worry about, and it was under control. The resulting spike saw sterling jump a cent against the single currency and nearly 1.5 cents against the greenback while making decent gains across its other major pairings over the day.

With spikes like this, we often see a correction the next day as traders take the profit from their positions and with Carney seemingly not concerned at all with the inflation situation, the chances of other members siding with Ms Forbes is unlikely going forward, especially before she leaves in the summer. With that in mind, it may be worth talking to one of the team this morning just in case the gains are lost. With data flows starting at 9.30am, time is limited should you want not to get caught out!

Today we have EU trade balance and the G20 meeting, while Stateside, Angela Merkel, the German premier, has a visit with President Trump. At lunchtime, Mark Carney again speaks as he addresses the Treasury select committee for the quarterly Bank of England Bulletin which could throw up some further volatility for sterling. As the week comes to a close, we leave with industrial production and consumer confidence figures from the US as the G20 meeting continues over the weekend.