Sterling has just bounced off some lower levels following the latest Bank of England interest rate decision.
As expected, they kept interest rates on hold at 0.5%, however there was an extra vote in favour of hiking rates this month therefore narrowing the vote to 6-3.
After a period of rather mixed UK data and ongoing Brexit issues, the market were expecting the voting to remain as last time, with only two dissenters, so this is a positive result for Sterling as it increases the chances of a nearer rate hike from the BoE. Since mid-April BoE expectations for nearer rate hikes were quashed and today’s decision should lend a bit of short-term relief for Sterling bulls.
Committee members highlighted they felt more confident that the slowdown seen in Q1 was temporary (weather-related) and that consumer spending/confidence has bounced back strongly. An August rate hike is therefore more likely now but it will heavily depend on how the data comes in between now and then. Wage and inflation levels will certainly need to show a bigger pickup for the BoE to make any change.
As a result, the GBP/USD has already moved up 1-cent from today’s low but still trades close to a 7-mth low. The GBP/EUR has jumped close to 1-cent higher and trades at the highest levels this week.