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The pound was under the spotlight during the morning London session. And unfortunately for pound bulls, the pound got a bearish kick after the BOE failed to provide any hawkish surprises.

  • Some European countries observing Ascension Day holiday today
  • Italian industrial production m/m: 1.2% vs. 0.4% expected, -0.5% previous
  • U.K. manufacturing production m/m: -0.1% vs. -0.2% expected, same as previous
  • U.K. industrial production m/m: 0.1% vs. 0.2% expected, 0.1% previous
  • Construction output in the U.K. m/m: -2.3% as expected vs. -1.0% previous
  • U.K. goods trade balance: -£12.3B vs. -£11.2B expected, -£10.4B previous
  • As expected, 7-2 vote to keep the Bank Rate at 0.50%
  • Ian McCafferty and Michael Saunders voted for a rate hike again
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B

Major Events/Reports:

MPC decision, minutes, and inflation report

The BOE’s MPC released their latest inflation report, as well as the minutes for their latest monetary policy huddle late into the session. And as usual, below are some of the more important and/or interesting points in, well, bullet points for easier reading:

  • The MPC voted to maintain the BOE’s current monetary policy
  • As expected, 7-2 vote to keep the Bank Rate at 0.50%
  • Ian McCafferty and Michael Saunders voted for a rate hike again
  • These two BOE members “put more weight on trends in business surveys and labour market data, and judged the weakness in the Q1 GDP data to be temporary or erratic, heavily affected by adverse weather.”
  • For these members, the near-term softness in CPI inflation could be explained by the reduced pace of pass-through from sterling’s depreciation, and hence would not materially affect the profile of inflation in the medium term. The labour market had continued to be strong, there was widespread evidence that slack was largely used up, and pay and domestic costs had continued to pick up broadly as expected.”
  • 9-0 vote to maintain stock of government bonds purchased at £435B
  • 9-0 vote to maintain stock of corporate bonds purchased at £10B
  • The BOE tried to shrug off the weak Q1 GDP growth by pointing out that “This was likely in part to have reflected adverse weather in late February and early March.”
  • Also, “Survey indicators, and evidence from the Bank’s Agents, suggested that growth had been somewhat stronger in Q1 than implied by the preliminary estimate.”
  • As for the weaker-than-expected inflation, the BOE blamed that on the inflationary effect of the pound’s past depreciation fading at a faster-than-expected pace.
  • The BOE still has a hiking bias when it noted that “The Committee’s best collective judgement therefore remains that, were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon.”
  • However, “All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.”
  • Other than that, the BOE downgraded its GDP growth and inflation forecasts for 2018. However, the BOE also slightly downgraded its inflation forecasts for 2019 and 2020, as you can see below.
  • Despite the downgrades, the BOE noted that “The updated forecast and the main factors shaping it were broadly similar to those set out in the February Report.”

BOE’s Carney speaks

BOE Guv’nah gave a presser to discuss the BOE’s monetary policy decision.

Carney was about the BOE’s outlook, and Carney said that:

“Now, this is not an economy that is growing at robust rates, but we expect it to reassert at rates that are stronger than the rate of growth of the supply capacity of the economy, that will continue to build domestically generated inflation, which will be increasingly important to the inflation profile, as the imported inflation from the past depreciation of sterling… comes off.”

However, Carney implied that the BOE is not very confident with its outlook when he said that most BOE members are basically in wait-and-see mode.

To quote Carney directly:

“The judgement of the majority of the committee is you wait to see for some evidence of that reasserting.”

Still, Carney reiterated that the BOE has a cautious hiking bias when he said that:

“[I]nterest rates are likely to go up to a limited extent and at a gradual pace.”

Commodities extend gains

Commodities followed up yesterday’s rally with yet another rally. And this time, the commodities rally was more broad-based since precious metals also caught a bid.

And it’s probably safe to attribute the commodities rally on the Greenback’s weakness. Some market analysts, for instance, were attributing the rise of precious metals like gold on Greenback weakness. Although the risk-off vibes in Europe may have also helped to drive up safe-haven demand for precious metals.

Anyhow, the U.S. dollar index was up down by 0.17% to 92.79 for the day by the end of the morning London session.

Precious metals were in the green.

  • Gold was up by 0.29% to $1,316.80 per troy ounce
  • Silver was up by 0.52% to $16.625 per troy ounce

Base metals were in demand again.

  • Copper was up by 1.42% to $3.101 per pound
  • Zinc was up by 0.23% to $3,093.00 per dry metric ton

Oil benchmarks raked in more gains.

  • U.S. WTI crude oil was up by 0.52% to $71.53 per barrel
  • Brent crude oil was up by 0.18% to $77.35 per barrel

Returning risk aversion in Europe

The major European equity indices had a mixed start. However, it soon became apparent that risk aversion was the more dominant sentiment in Europe since many of the major European equity indices began to slip into the red as the session progressed.

Market analysts blamed the risk off vibes on disappointing earnings results that weighed on telecoms and utilities.

  • The pan-European FTSEurofirst 300 was down by 0.25% to 1,535.65
  • Germany’s DAX was still up by 0.27% to 12,977.81 but off the day’s high at 13,034.55
  • The blue-chip Euro Stoxx 50 was down by 0.26% to 3,560.75

Major Market Mover(s):


The pound was the worst-performing currency of the morning London session, thanks to an influx of sellers after the BOe failed to provide any hawkish surprises.

GBP/USD was down by 30 pips (-0.22%) to 1.3530, GBP/JPY was down by 62 pips (-0.42%) to 148.39, GBP/CHF was down by 60 pips (-0.44%) to 1.3560


The Loonie was the best-performing currency of the forex bunch, very likely because the Loonie was tracking the rise in oil prices.

EUR/CAD was down by 28 pips (-0.18%) to 1.5188, GBP/CAD was down by 84 pips (-0.50%) to 1.7295, NZD/CAD was down by 16 pips (-0.19%) to 0.8859

Watch Out For:

  • 12:30 pm GMT: Headline (0.3% expected vs. -0.1% previous) and core (0.2% expected, same as previous) readings for U.S. CPI
  • 12:30 pm GMT: Canada’s NHPI (0.0% expected v.s -0.2% previous)
  • 12:30 pm GMT: U.S. initial jobless claims (219K expected, 211K previous)
  • 6:00 pm GMT: U.S. Federal budget balance ($215.0B expected vs. -$208.7B previous)