GBP: Nothing in the BoE policy package to sustain a rally - TDS

Analysts from TDS, point out that markets had a limited response to today’s events from the Bank of England, that left the interest rate unchanged as expected.

Key Quotes:

“As expected, the Bank of England unanimously voted to keep Bank Rate at 0.50% and QE at £375bn.

“The central forecast of today’s Inflation Report was conditioned on the status quo (thus a Remain win). The MPC revised down its growth forecast but left its inflation forecast broadly unchanged. Nevertheless, the BoE discussed risks associated with a Leave win, identifying a possible material slowdown in both demand and supply, as well as a sharp depreciation in the exchange rate.”

“ Markets have responded relatively little to today’s decision”

“We think today’s push up to around 1.4530 and quick reversal since may represent the top for this correction in the larger trend lower in GBPUSD. Further resistance higher comes in at 1.4575 and 1.4620. If we are correct, we think a turn lower toward the low 1.40s is likely in near future.”

“The May BoE releases do not present an immediate call for action with respect to sterling. The GBP has strengthened against most of its G10 peers in the wake of today’s events, but we do not see anything in the policy package that would suggest this move is likely to become a sustained move higher.”