BoE disappoints again with expected 50bp hike

Hi everyone,


There was a 50-50 chance in the outcome to the month's main event today and unfortunately there was no change in the dovish stance from the BoE. Economists got this one right again with a 50bp call, meaning it's the first time in over 30-years the sizeable hike has been done 2-months in a row. Not the decision most wanted to see, but the saving grace is that doomsday hasn't arrived for GBP today, as predicted by some traders and investment banks. 


The result was close in the end which has aided in the Pound's value we feel so far (5 voted for 50bp, 4 for 75bp, 1 for 25bp). In the build up to the data release, Sterling had gained 0.5% across the board and nearly 1% up on the day. But that was quickly lost after the statement at midday. Peak inflation forecast has been lowered by 2% due to the Government's intervention, but it's likely that the UK is in a recession which provides another headwind for the Pound. 


Elsewhere, the Fed continued the market narrative for continued $ dominance, as well as an ongoing aggressive interest rate path. For the third month in a row, 75bp was the result and "The FOMC is strongly committed to getting inflation down to 2% and we will keep at it until the job is done" was the main headline by Fed Chairman Powell (both expected). Forecasts predict the rate cycle to continue through to next year, unemployment will rise and economic growth has been lowered. All whilst the $ strengthens its hold on the market, due to global recession fears. 


Before both interest rate decisions, the Pound was finding some support in the market. Now we have got the major data for the month out of the way, it's a waiting game once again in how the BoE news will be interpreted exactly by economists and traders alike. But there is no rest for the wicked in this game, as tomorrow's PMI data will bring with it volatility and so will the Governments mini-budget, that has the chance of potentially strengthening GBP..


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