Market News & Analysis


Top Story

GBP Jumps As BoE Keeps Rates On Hold, Cuts Outlook

The Bank of England voted to keep interest rates on hold ay 0.75%. The MPC vote split was 7 – 2; a more hawkish vote split than what markets were expecting sending the pound shooting higher.

MPC members have decided to listen to the improvement in sentiment data, which has shown signs of a bounce following the decisive Conservative win in the elections. The committee will now watch closely to see whether the early indication of an improved outlook will translate into stronger hard data. 

Whilst holding back on the rate cut, the BoE also slashed growth forecasts for the British economy to the lowest level since WWII.
  • 2020 GDP revised to 0.8%, down from 1.2%. 
  • 2021 GDP revised lower to 1.4% down from 1.8%.

The move by the BoE reflected how the central bank viewed Britain’s adjustment after Brexit. 

Whilst the BoE are cautiously optimistic over the state of the UK economy currently, there are still fears over how the UK will leave the EU. At the end of this year higher trade tariffs could cause a disruption to the economy. Brexit uncertainty dragged on the UK economy across the past year and could potentially continue to do so this year.

The BoE also added that interest rate policy in the short term “may need to reinforce the expected recovery of GDP growth, should more positive signals from recent indicators are not sustained.” In other words, should the hard data not reflect the improvement in sentiment, the BoE could cut rates.

Given that the market was pricing in a 50% chance of a rate cut, volatility was expected either way. However the hawkish vote split and broadly upbeat sounding BoE lifted sterling.Prior to the announcement GBPUSD was flat around $1.3024. The pair surged to $1.3108 and is currently finding support around $1.31.

Traders will now look ahead to Brexit tomorrow. This is priced in, so no big swings are expected. However, it will refocus attention onto the complex trade negotiations ahead which could pressurise the pound.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.