Pound Sinks On Bleak BoE Outlook
The British Pound approaches the weekend attempting to recover some of the significant losses against its major counterparties after the Bank of England painted a bleak picture of the economic outlook.
The central bank surprised markets with the sheer gloom of the economic forecasts published in its Monetary Policy Report, with a number of market analysts believing the tone taken could ensure the British Pound remains on the back foot for some time to come.
In detail, the BoE increased interest rates by a further 25 basis points to 1.00% which was in line with consensus forecasts. There was, however, a 6-3 split for the decision with Haskel, Saunders and Mann voting for a larger 50 basis-point increase and the decision was slightly more hawkish than expected. Inflation also hit 7% in March with MPC projections expecting the figure to rise to 9% in April before peaking just over 10% in Q4 this year.
In level terms, the firmer tone to the dollar sees EUR/USD open this morning back down at the 1.05 handle whilst GBP/EUR opens lower circa 1.17. Cable (GBP/USD) also continues its move lower to trade in and around the 1.23 level.
Datawise and ahead today, the main release of note will be the latest US labour market report. The consensus is for payrolls to rise by 391k in April, while the unemployment rate is forecast to edge lower to 3.5% from 3.6%. Additionally, speeches from a number of Fed and BoE officials throughout the day may also garner close attention on markets.