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BoE Turns Hawkish But Cable Can't Hold Gains

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Contrary to earlier reports Mr. Sentance and Mr. Weale were joined by Mr. Dale rather than Charles Bean but regardless of the line up the hawks appear to be gaining momentum as the BOE concluded that "the case for an increase had grown in strength."

The hawkish members of the MOC argued that the "the upside risks to the medium-term inflation outlook from global inflationary pressures and the possibility that inflation expectations would move up outweighed the downside risks to inflation associated with uncertainty about the strength of the recovery and the possibility of persistent spare capacity."

Nevertheless despite the decidedly more hawkish tone of the MPC minutes it is doubtful that the BoE will increase rates anytime before Q2 of this year, as the majority of members noted that there was merit in waiting to see how the economy performed in early 2011.

After rising to a high of 1.6275 cable sold off in the aftermath of the news as traders tempered their expectations of rate hike in the immediate future in a classic sell the new dynamic. Still the MPC vote confirms the bullish thesis on sterling which argues that the BoE will begin to tighten sooner rather than later and should provide support for the unit in the near term. Therefore if risk appetite picks up as the day progresses, the pair could make another run at the yearly highs of 1.6279.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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