Sterling and UK Yields Drop as BoE Lowers Growth Forecasts

The pound slid from an 11-month high versus the dollar and U.K. government bonds rallied after the Bank of England voted to keep interest rates unchanged, while also cutting the country’s economic growth forecast.

Sterling dropped to its weakest level versus the euro this year as money markets showed traders pushed back expectations for a rate hike to November 2018 from August 2018 prior to the decision. The BOE’s Monetary Policy Committee voted 6-2 in favor of keeping rates unchanged at a record-low 0.25 percent. The central bank lowered its economic growth projections to 1.7 percent this year from 1.9 percent.

“The drop in sterling may suggest that some investors were betting on a surprise hawkishness from the meeting,” said Credit Agricole SA strategist Valentin Marinov in emailed comments. “The markets will continue to bet on a hike in 2H18, which could leave GBP back at square one.”


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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.