Market Analysis

Sterling falls despite Bank of England hiking growth expectations

Sterling eased lower on the foreign exchange market on Thursday, despite a more bullish than expected monetary policy statement from the Bank of England. The Bank of England kept interest rates on hold as widely expected, but unexpectedly revised the United Kingdom’s growth expectation higher.

The Bank of England Monetary Policy Committee revised its GDP forecast higher to 1.5 percent for this year and 1.6 percent GDP growth for next year. The Bank of England’s monetary policy statement also noted that the recent pick-up in global economic activity has helped to improve the United Kingdom economic outlook.

The report also mentioned that the recent uptick in the United Kingdom’s macroeconomic data was partly due to stockpiling for Brexit and may only be temporary. UK GDP has been outpacing expectations recently, as UK businesses attempted to stockpile before the United Kingdom was initially due to leave the European Union.

In regard to interest rate increases, the Bank of England said that they did not expect that an interest rate increase would be appropriate until the United Kingdom economy was on a much stronger footing. They also said that the UK housing market was the only area in the economy where consumer demand had remained subdued.

Inflation also remained a concern for the Bank of England, which caused the central bank to lower its current inflation expectations for the UK economy. Sterling traders appear to have taken note of the bearish elements inside the policy statement, although the British pound still remained well supported against the euro currency.


EUR/GBP Daily Mountain Chart | Source: ActivTrader

EUR/GBP Daily Mountain Chart | Source: ActivTrader


The EUR/GBP pair is back under pressure below the 0.8600 level as the British pound continues the current trend of strength against the euro currency. The daily chart is showing a bearish head and shoulders pattern, with the 0.8400 level the likely near-term downside target if the 0.8520 level is breached.


Written by Nathan Batchelor, External Analyst

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