In a widely expected decision, the Bank of England's Monetary Policy Committee held the policy rate unchanged at 0.75% with a unanimous vote. The asset purchase facility remained steady at €435 billion as well. Below are some key takeaways from the monetary policy statement.

  • Since the Committee’s previous meeting, the news in economic data has been mixed, but the MPC’s February Inflation Report projections appear on track.
  • The broad-based softening in global GDP and trade growth has continued.
  • Shifting expectations about the potential nature and timing of the United Kingdom’s withdrawal from the European Union have continued to generate volatility in UK asset prices, particularly the sterling exchange rate.
  • The economic outlook will continue to depend significantly on the nature and timing of EU withdrawal.
  • The appropriate path of monetary policy will depend on the balance of these effects on demand, supply and the exchange rate.
  • The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.

When is the BoE rate decision and how could it affect GBP/USD?

The pair traded with a bearish bias around one-week lows ahead of the key event risk, though reaction to the BoE announcement seems more likely to be limited. Meanwhile, Yohay offers important technical levels to watch for: “1.3135 is the confluence of the Fibonacci 38.2% one-month, the Pivot Point one-day Support 1, and the Fibonacci 61.8% one-week.”

About the BOE interest rate decision

BOE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

Charlotte de Montpellier, economist at ING, explains that the SNB has not changed monetary policy today, keeping rates unchanged.

Key Quotes

“Despite a slight depreciation of the Swiss franc, the SNB still describes the currency as "highly valued" and continues to intervene on the foreign exchange market, if needed.”

“The SNB has also reduced its conditional inflation forecast (i.e. assuming an unchanged policy rate). For 2019, it expects an inflation rate of 0.3%, compared to its forecast of 0.6% in December and 0.9% a year ago. This downward revision is, according to the SNB, the result of lower growth prospects, weaker inflation and revised expectations about monetary policy around the globe. For 2020, the SNB forecasts an inflation rate of 0.6% and 1.2% for 2021. The revised forecasts are a sign that the SNB is more dovish than ever before and is not planning any monetary tightening over the forecast period.”

“Regarding GDP growth forecasts, the SNB recognises that indicators have deteriorated in recent months. However, it believes that they reflect a "moderately positive" dynamic and forecasts growth of around 1.5% in 2019. While the government predicts 1.1%, this forecast seems, in our opinion, relatively optimistic.”

“We believe the SNB will not be able to raise rates for several years. It will have to wait for the next economic cycle to have the opportunity to increase them. In the meantime, negative rates are likely to remain the norm for Switzerland. At the same time, we don't believe the SNB will further reduce rates in the event of a stronger-than-expected economic slowdown.”

Danske Bank analysts point out that the Norges Bank (NB) has raised the policy rate by 25bp from 0.75% to 1.00% today and the rate path was adjusted upwards, as domestic factors, including the oil price and NOK, more than countered the negative effects of global growth and rates.

Key Quotes

“As Norges Bank clearly supports our view on the relative performance of the economy, we now expect NB to hike rates again in June, and deliver yet another rate hike in December (previous call was one 2019 hike in September).”

“The rate path published in the Monetary Policy Report (MPR) was adjusted upwards until early 2021, and then downwards. Specifically, the rate path indicates that the next hike could come as early as June, and that a third rate hike in 2019 has a more than a 50% probability. Further out the rate path signals slightly more than one hike in 2021 and flattens around 1.75%.”

“We now expect NB to hike rates again in June, and deliver another rate hike in December, taking the policy rates to 1.50 % at the end of 2019.”

Irish Prime Minister Leo Varadkar crossed the wires in the last minutes reiterating that any extension to Article 50 must have a purpose and nobody desired a no-deal Brexit. There was no market reaction to these remarks as participants are waiting for the Bank of England to release its policy statement.

According to analysts at TD Securities, in the upcoming US session, the Philly Fed manufacturing survey should provide another look at the sector's activity outlook for March.

Key Quotes

“The market consensus expects the index to have recovered to 4.8 from the -4.1 level registered in February. Recall that the NY Empire manufacturing survey pointed to a decline in activity in the sector (although on an ISM-adjusted basis it was unchanged).”

“Conversely, initial jobless claims are expected to have ticked down to 225k for the week of March 16th.”

• The precious metal struggled to capitalize on the early positive move to three-week tops and started retreating from a resistance marked by 61.8% Fibonacci retracement level of the $1347-$1281 recent slide.

• However, given the overnight sustained break through 200-period SMA on the 4-hourly chart, bullish technical indicators on hourly/daily charts support prospects for an extension of the near-term positive move.

• Moreover, the fact that the intraday downtick remains supported near 50% Fibonacci retracement level add credence to the constructive outlook and should attract dip-buying near the mentioned resistance break-point.

• Meanwhile, a convincing break through 61.8% hurdle, near the $1321-22 region, would set the stage for the commodity’s further appreciating move towards $1326-27 intermediate zone en-route $1332-33 resistance.

Gold 4-hourly chart

The UK PM Theresa May's spokesman was out on the wires in the last hour, saying that Brexit is an incredibly challenging process and that the government plans to put Brexit deal to vote ASAP.

Additional quotes:

• PM May working incredibly hard to get Brexit done.
• Will have meetings with EU's tusk, French President Macron ahead of the Summit on Thursday.