• We are evidence-based
• Inflation dynamics in the UK are different to that in the US
• There is always volatility when it comes to the data
• We can’t not look at the labour market, even with the latest ONS data shortcomings
• There is no law that says the Fed must move first before other central banks
• One rate cut will still leave us with restrictive monetary policy
• We do not have a very precise view on where rates will end up (Broadbent)

There doesn’t seem to be much added spice in the Q&A here. I will update the post if there’s anything else but I reckon that’s about it in terms of significant headlines from the BOE today.

This article was written by Justin Low at www.forexlive.com.

• But it is encouraging that inflation will be close to target in the coming months
• Higher than expected wage and services inflation since February should give us pause for thought
• But we should not overinterpret it, they are well within the normal margins of variance
• Change in bank rate in June is neither ruled out nor a fait accompli
• Inflation persistence outlook is similar to February
• More data will help to assess outlook on CPI inflation
• We are making very good progress in returning inflation to 2% target
• Restrictive monetary policy stance is working
• It is likely we will need to cut bank rate over the coming quarters
• It is also possible to cut more than what is currently priced into market rates
• We have no preconceptions on how far or how fast we will cut rates

It is interesting that he wants to try to keep June on the table. There will be two CPI reports prior to the meeting on 20 June, but the last one will only leave them with a day to think things over. I doubt we’ll see that much progress to warrant a majority vote for a rate cut by then.

GBP/USD slowly pared losses to around 1.2480 before Bailey mentioned that they might cut more than what markets are pricing in. That is sending the pair down to 1.2455 again.

This article was written by Justin Low at www.forexlive.com.

Not big surprises but the addition of the line saying „will consider forthcoming data releases and how these inform the assessment that the risks from inflation persistence are receding“ suggests that the BoE might even cut in June if we get downside surprises in the inflation figures. The next data to watch will be the labour market report on May 14 and the CPI data on May 22.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

It’s all about the little things in the BOE policy decision here today. Let’s summarise what they are.

1. They added one new line to the forward guidance, noting that they will be watching carefully the developments on how inflation persistence will be receding. The key word there being receding of course.
2. We saw Ramsden join Dhingra in voting for a rate cut at this latest meeting. So, one isn’t the loneliest number anymore when it comes to the bank rate vote at least.
3. The BOE itself has lowered its inflation forecasts compared to February, signaling that they are growing more confident on the outlook – at least for now. But then again, these are just forecasts.
4. There’s a side remark from BOE governor Bailey stating that recent news on inflation has been „encouraging“ and that he is „optimistic that things are moving in the right direction“.

These aren’t anything major on their own but they do add up. And that perhaps explains the pound’s initial reaction, which is a drop across the board. GBP/USD fell from 1.2490 to 1.2450 but is running into a minor support:

As much as the little things do add up, they are still just little things at the end of the day. I don’t see this as producing much of a meaningful shift to the BOE outlook. And the rates market is also helping to convince of that with August still the favourite for the BOE to start cutting rates.

The total rate cuts priced in for the year is little changed at ~55 bps currently, just mildly higher from ~53 bps before the decision.

That being said, the near-term chart for GBP/USD above is still one that sees sellers in control. But for a real push towards 1.2300 again, I reckon it needs help from the dollar side of the equation. As much as the near-term bearish bias is sustained, it’s hard to imagine a much steeper drop in sterling just off this alone.

In looking at the dollar though, we might have to wait until the slew of US data next week before anything major though.

This article was written by Justin Low at www.forexlive.com.