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

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