Bank of England surprises the market
Today’s Bank of England announcement of leaving interest rates unchanged caused a rise in Sterling (GBPUSD) as the minutes of the MPC meeting reveal a change in the voting dynamics, with the Committee now split 6-3 in the voting for the status quo from its previous 7-2. Whilst this brings no immediate impact, it does raise the possibility of a 25bp rise later in the year as inflationary pressures are brought to bear. In the short term Sterling bounced a full cent from its low of 1.3110. These are short term reactions to the news from a market that was positioned overall short of Sterling. There may be a little more upside but overall there is still more potential bad news than good news. Brexit still weighs heavily on the UK Government, and despite the UK Prime Minister Theresa May putting a positive spin on delivering the outcome that 17.2m people voted for, there is significant opposition from people in key positions who are working behind the scenes to frustrate the process. We would still see any rally as a selling opportunity.