Yesterday, the focus fell on a few major economic and political developments. One being the BoE’s monetary policy report and the other – the China-US trade tensions. Canadian data will be on the lookout for today.
Two MPC Members Want A Cut
The Bank of England kept its interest rate the same as expected, at +0.75%, but the interesting news was that two of the 9 members of the Monetary Policy Committee decided to vote in favour of a reduction in the interest rate. This made the markets worry, as the justification from those two members was that an immediate cut is necessary in order to keep the economy afloat. The two dovish members were Jonathan Haskel and Michael Saunders, who advocated that cheaper borrowing costs are something what the UK economy needs right now to battle lack of growth. As stated by the Bank, although the uncertainty surrounding a no-deal Brexit has diminished slightly, still, they see problems with the GDP growth in the near future. And if growth and inflation do not stabilise to required levels, the BoE will be forced to cut rates again. In that scenario, if the MPC would decide to reduce the rate by 25bps, it would bring that number back to the level seen between the end of 2017 and mid-2018, when the rate was at 0.50%. All this uncertainty probably won’t have a positive effect on the British currency, which means that GBP might stay in limbo, or it could feel slight bearish pressure.
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