<p style=““ class=“text-align-justify“>After a bit of a whipsaw on the initial announcement from the BOE, the pound is now settling lower as traders digest the situation. Cable rose to a high of 1.0838 amid the whipsaw but has fallen down by 1.5% to 1.0570 as the dust begins to settle.</p><p style=““ class=“text-align-justify“>10-year gilt yields have also come back up now to 4.30% after having been down to 4.10% earlier, though still lower by 20 bps on the day.</p><p style=““ class=“text-align-justify“>Going back to the pound, what exactly does the BOE announcement entail for the currency?</p><p style=““ class=“text-align-justify“>A return to QE (well, sort of) isn’t exactly ideal at a time when we are seeing an <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1″ class=“terms__main-term“>inflation</a> shock in the economy. Ultimately, I believe traders are that simple with their conviction. As much as this provides some level of calm and financial stability – which is supposed to be the benchmark for any developed market, it is no game changer to the overall situation in the UK economy.</p><p style=““ class=“text-align-justify“>Add that to the fact that the dollar continues to be on a rampage, it’s hard to imagine this being a pick-me-up for cable. The downside pressure will continue so long as the Fed and BOE are at odds in terms of their policy convictions. I’ve repeated that for many months now.</p><p style=““ class=“text-align-justify“>If anything, the BOE announcement today just adds more scrutiny for the pound and that will put it firmly in the crosshairs of traders waiting to capitalise on another rout in the gilt market.</p>

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