This week’s Hot Topic is UK interest rates as the BOE keeps rates unchanged
What Happened:
UK interest rates remained unchanged at 0.5% despite the majority of investors anticipating a cut.
The GBP/USD reacted positively following the BOE interest rate decision and the release of the minutes report.
The currency pair’s rate soared as high as 1.34737 and and ended with 1.8% increase.
**At the time of writing though the GBP/USD erased all of these gains and is trading 400 pips lower at 1.3080.
So What lead to this situation?
During their meeting, the nation’s Monetary Policy Committee (MPC) took the decision not to proceed with any rate adjustments after a vote of 8 to 1.
But even though the result suggests almost everyone’s consent not to take any action, the minutes released by the BOE on Thursday revealed that there is expectation by many of the MPC members that there might be some adjustments during their next meeting on 4th August.
The Bank also commented on the fact that some businesses are hesitating to proceed with their investment plans and projects while it also anticipated a slowdown of buy-sell transactions and development projects within the housing industry.
So What’s next?
The bank has to consider the nation’s slowdown of economic growth, according to projections made by a number of economists who also forecast that it could also fall into recession.
Now, even more investors are anticipating a rate cut but until then the markets are not prepared to settle as the economy is still pricing in the impact of the vote to Leave the EU.
Watch out for the ECB interest rate decision on Thursday and the CAD Price index on Friday.
Of course let’s not forget the possible downgrade of the Turkish economy by Moody’s
