There were no surprises in the Bank of England’s policy decision today to leave interest rates unchanged at 0.75%.
The real surprise was the bank’s latest growth forecasts, which left the doors open for further tightening in the future. Sentiment over the UK economy is poised for a boost, given how economic growth is now projected to expand to 1.5% this year from the decade-low 1.2% predicted in February. While growth figures were revised higher, inflation figures were revised lower, to 1.6% in 2019 and 2.0% in 2020. Overall, the Bank of England came across as cautiously optimistic but also highlighted how Brexit continues to cloud the outlook for monetary policy. With the central bank likely to maintain a patient stance and closely monitor Brexit developments before making any decision on interest rates, the Pound is seen edging lower in the short to medium term. Should economic data from the UK continue to improve and more clarity is offered on Brexit, the BoE will have a valid argument for taking action. However, when it comes to Brexit, if uncertainty remains the name of the game, rates are likely to remain unchanged for the rest of 2019.
Looking at the technical picture, the GBPUSD is under pressure on the daily charts with prices trading marginally below 1.3050 as of writing. Sustained weakness below this point is seen opening a path back towards the psychological 1.3000 level.