BoE keeps rates unchanged but downgrades growth forecasts
As widely expected, the BoE has held rates unchanged at 0.75% in a unanimous vote (9-0). However, given the focus on Brexit at the moment, the growth forecasts in the inflation report were also in focus and we saw 2019 revised lower from 1.7% previously to 1.2%. 2020 has also been marked down from 1.7%, though to a more modest 1.5%. They also see inflation falling a little below the target rate of 2.0% in the near term, though over the year, they forecast a higher rate of 2.35% vs 2.1% previously.
GBP has naturally reacted on the lower growth figures, pushing further below the 1.2900 level to hit lows just ahead of 1.2850. We not strong support in the low 1.2800's, and buyers have come in ahead of this, though we are likely to remain under pressure here unless the USD starts to ease up a little - has played a strong part in the sell-off this morning.
As such, looking at the reaction in EUR/GBP, we can see the response to the BoE forecasts is relatively modest, with the cross rate unable to better the highs seen this week, though as yet, it is early days and we may see a stronger push later on in the session.
Ahead of the BoE announcement, PM May's talks in Brussels have concluded, with the EU's Juncker saying the meeting went well and there was a unified intent on finding a solution to the current Brexit impasse. However, he went on to say that the withdrawal deal will not be reopened, so it is unclear as to what progress (if any) has been achieved in today's meetings. As mentioned earlier, expectations were low for any form of an alternative agreement being sorted today.