|

BOE Analysis: Carney carnage, not a hawkish hold - Pound remains pressured

  • The BOE left interest rates unchanged and provided some dovish comments. 
  • Governor Carney sounded a bit more optimistic and stabilized Sterling but the cautious approach weighs. 

The Bank of England's Super Thursday lived up to the promise. The GBP/USD rose to $1.3617 ahead of the publication on high expectations and some US Dollar weakness. And then came the Quarterly Inflation Report. 

Dovish QIR

Inflation has fallen back more rapidly than expected in its February Quarterly Inflation Report. So, the costs of waiting outweighed the costs of acting at this point. Many saw a value in waiting to see how the data evolve in the coming months.

About inflation, it is now expected to be somewhat lower in the near-term while in the medium it could be only a bit lower. Inflation indeed dropped to 2.5% YoY in March. 

 So about the interest rate, it is likely expected to rise at a gradual pace and to a limited extent. This is the regular message. 

The GBP/USD fell as low as $1.3497 on the generally cautious messages.

Carney was already a bit more optimistic

The Governor of the BOE sent a message that the softness was probably temporary and still sees two rate hikes in the next year and a half. He did say the economy had a speed limit of 1.5% GDP growth and that Brexit casts clouds as the conditions after the transition period is unknown. However, he was happy with the labor market. 

Carney brushed off the criticism about the change from February to the outlook now. He insisted that households still expect interest rates to rise gradually. However, he also added "we will see," leaving the door open to further delays.

The GBP/USD then stabilized and even reached $1.3550 but began losing ground once again. 

All in all, despite the attempts to remain optimistic, the BOE has moved from being more hawkish to a policy closer to "wait and see."

This is not a hawkish hold and weighs on the Pound.

More: GBP/USD has its battle lines clearly drawn on Super Thursday — Confluence Detector


 

Author

Yohay Elam

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

More from Yohay Elam
Share:

Editor's Picks

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage. 

GBP/USD recovers losses despite rising UK political risks, BoE rate cut bets

Pound Sterling advances against the US Dollar after registering modest losses in the previous session, trading around 1.3650 during the Asian hours on Wednesday. The pair could extend losses as the Pound Sterling faces pressure from rising political risks in the UK and growing expectations of near-term Bank of England rate cuts.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release. 

Bitcoin, Ethereum and Ripple show no sign of recovery

Bitcoin, Ethereum, and Ripple show signs of cautious stabilization on Wednesday after failing to close above their key resistance levels earlier this week. BTC trades below $69,000, while ETH and XRP also encountered rejection near major resistance levels. With no immediate bullish catalyst, the top three cryptocurrencies continue to show no clear signs of a sustained recovery.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.

BNB prolonged correction signals deeper bearish momentum
BNB (BNB), formerly known as Binance Coin, is trading below $618 on Wednesday, marking the sixth consecutive day of correction since the weekend. The bearish price action is further supported by rising short bets alongside negative funding rates in the derivatives market.