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Week In FX Europe – Will The BoE Show Dissent?

This week saw the pound [1] slip to a four-week low on Wednesday (£1.6753), after investors were left disappointed following the Bank of England’s (BoE) ‘dovish’ inflation report. A ‘hawkish’ report had been expected and certainly priced in.

UK policy makers have left its growth and inflation forecasts broadly unchanged – a rise of its main benchmark rate (+0.5%) is still expected in H1 of 2015. In the post press conference, Governor Carney played down expectations of an earlier-than-expected rise in interest rates. Tightening UK monetary policy depends on the degree of slack in the economy, and the prospects for its absorption. In retrospect, sterling’s reaction was a clear signal that the market once again got ahead of itself.

Attention now turns to the minutes from the BoE’s May 7-8th MPC meeting. They will be published next week (May 21st), a day after the UK’s April inflation data. Annualized inflation is expected to tick up to +1.7%, from a four-year low of +1.6% in March. The minutes will provide a better indication of the spectrum of views within the MPC as “to spare capacity and the size of the minority supporting earlier tightening.”

The BoE’s MPC membership will change by one-third over the next few months:

In – Haldane, Forbes and Shafik join on June 1st.
Out – Dale Bean and Fisher

The market should expect the high turnover to be a blow to the ‘hawks’ backing a rate hike by year-end. It would be a tad unusual for any new members to “swim against the current” so early in the new career. Expect the new members to follow the leader, Carney, who does not seem in any rush to tighten policy.

Other Major Events Next Week:




* GBP Consumer Price Index
* GBP Bank of England Minutes
* USD Fed Releases Minutes from April 29-30 FOMC Meeting
* GBP Gross Domestic Product
* CAD Consumer Price Index

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell [29]

Vice-President of Market Analysis at MarketPulse [30]
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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