MPC Growth Forecast cause Sterling strength
Sterling saw significant gains against the maajority of major currencies yesterday following the Bank of England (BOE) interest rate decision. UK interest rates were kept on hold at 0.5% as anticipated. There was however hawkish comments in the minutes following the decision which caused the surge in the pound’s value. The Monetary Policy Commitee (MPC) raised economic growth forecasts citing a stronger global outlook and gave the indication that interest rates may need to rise sooner than previously predicted.
There is now a 75% chance of a hike in May and a hike by August has already been priced in. I am not so convinced taking into account the BOE’s track record. Who if you take away the last twelve months gave endless hints at changes for over a decade without any change. If you also add the uncertainty surrounding Brexit into the mix there is definatly reasoning behind keeping rates on hold.
As the markets move on rumour as well as fact, if a hike does not come into effect in May expect Sterling to fall heavily in value. We have already seen the Pound retract from yesterday’s highs.
George Soros donates £400k to Best of Britain
There could be further uncertainty surrounding the Brexit situation with George Soros who some beleive is responsible for breaking of the BOE on Black Wednesday in ’92 has donated £400k to the Best of Britain campaign in an attempt to keep the UK in the EU.
If you have a trade involving Sterling be wary of hoping for further significant rises. If we look at GBP/EUR for example there is resistance every time we hit 1.15, the peak of the market in the last nine months.
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