Bank of England out with a hawkish hike

John Hardy

Head of FX Strategy, Saxo Bank Group
John Hardy joined Saxo in 2002 and has been Head of FX Strategy since October 2007. He focuses on delivering strategies and analyses in the currency market as defined by fundamentals, changes in macroeconomic themes, and technical developments.

The Bank of England has come out with a more hawkish hike than expected. As forecasted, the BoE hiked the policy rate by 25 basis points. It also offered slightly more hawkish language in the guidance than was perhaps expected.

As well, the Monetary Policy Committee voted 9-0 versus perhaps 7-2 or even 8-1 expected, also somewhat hawkish at the margin. Sterling is a bit firmer in response, with EURGBP off a bit toward the lows of the day (the big zone there is 0.8800-25). The interest rate reaction suggests that this was no shocker, however, and we'll have to have a look at the Carney press conference up shortly for further spin.

On the margin, this is sterling bullish so far... 

Potentially holding back sterling traders from committing risk at the moment is the prospect of Prime Minister May's meeting with French president Macron tomorrow, as signaling from Macron will be closely scrutinised in the wake of that meeting for signs that his stance on Brexit is thawing, something that has been detected from German chancellor Merkel recently.

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