GBPUSD, Daily
The minutes noted that all members agreed that a repo rate hike was more likely than not over the three-year forecast period. The minutes also noted that two members regarded the decision as finely balanced (most likely the relatively hawkish-leaning Weale and McCafferty). The MPC also dropped the reference seen in the March minutes that the strength of sterling (which is up 15% y/y) could have potential to prolong the period for which CPI would remain below target, though it was noted that currency strength could curb exports and supress food prices.
The MPC now noted hat currency strength may have fed through quicker than expected, which could mean less downward pressure on prices to come and a faster pickup in inflation when the effects of recent falls in energy and food prices dropped out of y/y comparisons. Cable sprang over 70 pips on this, to five-day high of 1.5014. The 50-day moving average at 1.5037 and last Friday’s peak at 1.5053 provide the next upside markers. EUR-GBP fell back toward intraday lows under 0.7190, despite concurrent EUR-USD strength. Uncertainties about the May-7 general election should curb sterling’s upside potential, all else equal.
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