GBP/USD trades low on Thursday ahead of the BoE rate decision. Speculations surrounding an imminent rate hike by the Bank of England (BOE) have became doubtful after the Fed disappointment on Wednesday But According to the economists at Bank of America (BofA), the Bank of England (BOE) is seen hiking the benchmark interest rate by 15 basis points (bps).
The key quotes of the Bank are “We expect a 6-3 BoE vote to hike Bank Rate 15bp on Thursday. However, we do not think that decision is a foregone conclusion.” “We expect BoE forecasts and communication to be consistent with fewer/slower rate hikes than the market prices.” “Should the MPC decide to delay the hike, the temptation would be for markets to roll this into December, so any disappointment in GBP would likely be short-lived.”
On the other hand, The Fed announced on Wednesday a $15 billion monthly cut to its $120 billion in monthly purchases of Treasuries and mortgage-backed securities, However at the same time, Chair Jerome Powell said that they will remain patient on the interest rate hikes until their maximum employment goal is accomplished. His tweak also covered the words on inflation, noting that rising price pressures are ‘expected to be transitory.’
Moving on to Brexit, tensions are still persisting between the European Union (EU) and the UK over the Northern Ireland (NI) protocol. The European Commission Vice President Frans Timmermans said it was “extremely well-known in London” that the demand to ditch the European Court of Justice (ECJ) could not be met. This was said after the UK Brexit minister Lord Frost said that the ECJ should be replaced with an independent arbitration panel and that it can have no role in settling disputes in Northern Ireland.
The Brexit issue also weighs on the pound. In the meantime traders wait for the important BOE decision for the next direction in the currency pair.
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