Cable lost a big figure on the BoE’s announcement to leave the repo rate at 0.25% by a vote of 6-2 at the Monetary Policy Committee, with one less member dissenting in favour of hiking rates by 25 bp than in June. The Inflation Report also nudged both CPI and growth forecasts lower. Sterling posted a low at 1.3139, which is a three-session low, before finding a toehold, since settling around 1.3150 pivot. The pound skidded to a nine-month low in the case against the euro as my T1 target at 0.9000 was achieved for +68 pips. Target 2 is the ambitious but attainable 0.9100.
We had been flagging a risk of a sell reaction in sterling markets as available data since the last policy meeting in June had, on net, bolstered the dovish viewpoint at the MPC. The earlier release of the UK services PMI beat expectations in headline, but the survey was a cloud with a grey lining as respondents’ optimism for the year ahead was low. The minutes to the MPC meeting also showed the majority view as being concerned that the UK economy is likely to weaken further, while it’s downwardly trimmed growth projections still assume a “smooth” Brexit process.
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