• The BOE is set to leave its policy unchanged and release new forecasts on "Super Thursday."
  • The willingness to raise rates once Brexit is resolved is the main question.
  • GBP/USD may drop if the BOE follows its peers.

The Bank of England publishes its rate decision, the Meeting Minutes from its deliberations, and the Quarterly Inflation Report (QIR) on Thursday, May 2nd, at 11:00 GMT. Governor Mark Carney will meet the press at 12:30 GMT. 

Economy doing well, but Brexit

The UK economy is still doing well, with wages rising at a satisfactory rate of 3.5% YoY while inflation remains tame at 1.9% YoY. The Unemployment Rate remains at a low of 3.9%, and credit is cheap.

The BOE would like to stay ahead of the curve on inflation and prevent cheap credit from having undesired effects, hiking rates once again. Their previous projections have shown rising inflation, and they signaled a rate hike this year.

Carney and co. have already raised rates to 0.75%, above the seemingly-eternal post-crisis level of 0.50% and above the post-Referendum emergency level of 0.25%. 

However, like all policymaking in the UK, everything is paralyzed by Brexit. The high level of uncertainty and the potential no-deal Brexit prevented any action. Brexit was getting closer, first on the original date of March 29th and then on April 12th, but it was eventually postponed to October 31st, Halloween.

May's decision is the first decision made after this "Brextension". There are almost six months to go, and a new question arises.

After the Brexit delay, does the BOE see more clarity or less?

Does the BOE now see calmer conditions that would allow for a rate hike? Or does the ongoing darkness around the momentous event take any tightening off the table? 

The BOE may stick to its forecasts and claim it is unable to make any political assumptions. The answer to the question depends heavily on the Bank's projections in the QIR. If the recent drops in prices are seen as temporary, the BOE may stick to its guns and continue saying it wants to raise rates. In this case, GBP/USD has room to rise.

However, the BOE is not isolated from politics nor the actions of central banks elsewhere. The Fed turned dovish, the ECB pushed back on its hike forecasts, Japan pledged "lower for longer" on rates, and other CBs are also moving becoming more dovish.

If Carney and co. remove rate hikes from the table, regardless of Brexit, GBP/USD has room to fall.

Apart from the next direction of interest rates, markets will also want to know who will head the Old Lady. Carney concludes his term at the end of the year and markets are already seeking clues about who will succeed him. Carney will leave the answer to the government, but any hint about the new direction will be closely watched. 


The critical question for GBP/USD is if the BOE still wants to raise rates this year or not. The Brexit extension, the lower inflation, the upbeat economy, and the dovishness of other central banks are all factors to consider.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD has lost its bullish momentum after having climbed above 1.0570 with the initial reaction to the US data in the American session and retreated toward the mid-1.0500s. On a weekly basis, the pair remains on track to close in positive territory. 


GBP/USD struggles to hold above 1.2300

GBP/USD struggles to hold above 1.2300

GBP/USD has edged lower following a jump above 1.2300 in the early American session on Friday. The market mood remains upbeat ahead of the weekend with Wall Street's main indexes posting strong daily gains on upbeat US data. 


Gold stays below $1,830 as US yields edge higher

Gold stays below $1,830 as US yields edge higher

Gold continues to fluctuate below $1,830 on Friday and looks to close the second straight week in negative territory. Fueled by the risk-positive market environment, the benchmark 10-year US Treasury bond yield is up more than 1% on the day, limiting XAU/USD's upside.

Gold News

Why Cardano could surprise over the weekend

Why Cardano could surprise over the weekend

ADA  set to close out the week with a gain on the workday trading week and over the weekend? Central banks signaled that the rate hike cycle is ending, meaning less stress and tight conditions for trading, opening up room for some upside potential with Cardano set to pop above $0.55 and test a significant cap.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!