BoE announcement as expected no change to rates or outlook
This morning's announcement from the BoE was never going to set off any fireworks, and we can pretty much assume this to be the case for as long as Brexit uncertainty persists. This is the key factor in keeping policy unchanged in the near term, though the consequences of the uncertainty have started to see a reemergence of spare capacity in the economy. Underlying growth has slowed according to the MPC statement, though remains positive with the labour market still seen as strong. At this stage, it is too early to tell whether this will soften.
The outlook also views a likelihood of weaker inflation if uncertainty continues, and with global growth weakening due to the US-China trade war, there are key concerns here which overlap with those of its counterparts around the world. Even so, a smooth Brexit could lead to a controlled tightening in rates, though we suspect this will also be data-dependent in light of the global outlook.
Sterling has not seen any response of note, with price action throttled into tight ranges once again after another attempt to push above 1.2500 vs the USD was snuffed out this morning. On the downside though, Cable seems to be finding dip buyers consistently, ahead of 1.2400 as the prospect of a no-deal being taken off the table, or delayed at the least is prompting a more favourable outlook near term.
Even so, EUR/GBP is not giving up on a move back through 0.8900, and we are currently pushing for better levels but sellers are not giving up just yet. We have a battle on our hands around the figure, though recent ranges point to a lack of conviction to go for a major breakout at this point.