Bank of England Still in Neutral
According to the most recent release of the Bank of England meeting minutes, central bankers were unanimous when it came to voting on the status of benchmark interest rates. That was expected. What wasn’t anticipated was the stimulus vote – which stood at an 8-1 in favor of no further asset purchases. MPC Member David Miles remained the lone dissenter, pushing for additional stimulus as further economic weakness still remained a viable reality.
Although encouraging the notion of an early withdrawal of stimulus, today’s minutes still reflect a central bank that remains concerned over the currently weak economy. The sentiment is being bolstered by policymaker comments that noted, “substantial headwinds to recovery” were still present – with the bank ready to “provide even more monetary stimulus through further asset purchases.” This likely leaves the Funding for Lending scheme still in the center of it all, with the BOE still banking on the program to kickstart growth.
With policymakers unlikely to add to already ballooned monetary stimulus, GBPUSD bulls are confident of less debasement in the short term.
In a surprise turn of events for the UK labor market, claims fell in the November, to the lowest since mid 2011, according to the Office for National Statistics. The report confirmed a decline in the national unemployment rate, published by the International Labour Organisation. The rate fell to 7.7% in the three month period through till November.
The resilience in the labor market remains a source of strength for the overall economy and will likely keep the MPC back on further rate cut discussions – even with the UK economy estimated to grow by 0.1% this year.
The day’s fundamental drivers are a boon for the GBPUSD, which was anticipated to move higher yesterday. A further extension is likely with a close above the 1.5837 close yesterday. The setup would bolster an advance on the 1.5919.
Source: FXTrek Intellicharts