BoE keep rates on hold

As expected, the Bank of England have just kept interest rates on hold at 0.5%.

The votes remained the same as last time around with two out of the nine policymakers voting for a hike. The Governor, Mark Carney, re-iterated that any future rate rises will be ‘limited and gradual’ and that ongoing Brexit negotiations are the main event risk ahead.

Money markets are now showing around a 50% chance of a rate hike at the August BoE meeting and at least one hike before the end of the year at 85% (which was near 100% before today’s meeting).

After the recent run of poor UK data, the BoE are likely to maintain this wait-and-see approach. Therefore, the Pound’s fate in the shorter term will be heavily driven by upcoming data releases, where traders will look for signs of whether the Q1 slowdown was driven more by temporary factors (e.g. weather) or whether it was down to more fundamental issues.

As a result, the Pound dipped a little following the news, but on the whole everything was largely priced-in so there haven’t been any large moves.