Talking Points:
- The BOE’s decision to keep rates on hold was unsurprising, but the 6-3 vote (from 7-2 last meeting) was.
- With Chief Economist Haldane dissenting for a rate hike, odds of a 25-bps tightening move in August have increased from 48% yesterday to 68% today, per overnight index swaps.
- See the full DailyFX Webinar Calendar[1] for upcoming strategy sessions.
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The British Pound[3] has been in near freefall since the middle of April, thanks in part to the machination of Bank of England Governor Mark Carney. After all, it was two months ago when he threw water on the idea that the BOE would hike rates in May, and indeed, as time wore out, no rate hike transpired.
As evidenced by today, the BOE and Governor Mark Carney are still as significant factors for the British Pound as they were back in April when GBP-crosses topped. But if the past two months were marked by dovish influence, the June rate decision may have yielded a more hawkish outcome than anticipated; the BOE is the catalyst for the British Pound’s reversal, just as it was the author of its demise.
Bank of England Rate Hike Expectations (June 21, 2018) (Table 1)
Although the BOE voted to keep its main overnight rate on hold at 0.50%, the Monetary Policy Committee’s vote breakdown indicated a more hawkish tilt than in times past. Coming in at 6-3 from last meeting’s 7-2 vote, Chief Economist Andy Haldane joined the ranks of the dissenters in calling for a
