Yesterday’s Bank of England announcement and quarterly inflation report came as no surprise. The Bank lowered the growth outlook and continued to highlight the challenges that lie ahead.
Some of the key takeaways from the Bank’s thinking: The fog of Brexit is causing short-term volatility in economic numbers, Brexit uncertainty is hitting the housing market and consumers, no-deal Brexit would be a shock that would be negative for growth and that the Bank’s central expectation was for higher uncertainty but some sort of Brexit agreement. Carney and Co. lowered this year’s growth estimates to a meagre 1.2% which was also seen helping GBP lower along with the barrage of comments above.
The pound dipped almost 1 cent against the greenback and 0.75 cents against the single currency. However, by the time Carney was wrapping up his Q&A session the pound had recouped much of its weakness. The fact is – none of this information is new. It’s widely expected that growth will slow and that uncertainty may be around for a while. As a result, traders and dealers scrambled to buy pounds, taking the rates back to square one.
Many are still hoping May might be able to extract some form of significant concession from the EU regarding the Irish backstop. Yesterday’s meeting with Juncker produced some positive rhetoric but nothing concrete. The clock is still ticking…
Have a good weekend.
Written by Viv Savani. 8:34am, February 8th 2019
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