The Bank of England have just voted to keep interest rates on hold at 0.75%.
The odds of a rate cut from this eagerly awaited decision had dropped from 70% to around 50% following solid employment figures and better-than-expected PMI surveys last week. Only two policymakers voted to cut rates by 0.25%, with the rest continuing to adopt a wait-and-see approach. This has helped support the Pound this morning after traders had taken a cautious approach ahead of the decision.
Although they haven’t cut rates this time, the statement from the BoE was relatively dovish and they’ve left the door open for a cut at some point this year (with the market now pricing in a 0.25% cut in August). Therefore, although this figure has helped lift the Pound today, the BoE are starting to lean towards a rate cut which is likely to limit any Pound gains from this vote. After the UK officially leaves the EU tomorrow night, the upcoming Brexit trade negotiations are likely to be the dominant driver of the Pound this year.
In other news, the Federal Reserve kept interest rates on hold overnight with no major surprises. The Greenback, however, has been gaining some support from safe-haven flows following the outbreak of the coronavirus disease. The markets are keeping a close eye on the developments of this disease which has infected over 7000 people. With massive flight cancellations, travel warnings, and extended holidays, the disease is impacting on financial markets.
As a result, the Pound has gained around 1-cent against both the Euro and USD and is pushing towards the upper end of its current range (highest levels of the week).