Look out below, GBP sinks on BoE decision
- FTSE -0.42%
- Dax -0.72%
- Gold -0.59%
- US oil +0.05%
The session started with USD strength dominating the price action post FOMC. Whereas not overly bullish, the Fed was not as bearish as the market was hoping for and there were no updates on any QE tweaks which was the reason for the disappointment. They were ‘dovish’ not seeing interest rates rise for three years. However, not ‘dovish enough’ for the immediacy.
As a result of this Fed disappointment and weak US retail sales prior to the meeting the Asian equity markets traded lower. European equity futures were lower before the cash open and that prompted the falls early London am. Bond yields were lower, copper down, gold down, commodity currencies AUD, NZD and CAD all lower and safe havens JPY, CHF were stronger. The day started off a clear risk off day.
At 0900GMT European final inflation readings came out. All the readings were in line with expectations, but still showing very depressed levels and multiyear lows since 2017. As a reminder the ECB revised their growth projections higher for 2020 to -8.0% and inflation expectations for 2021 were revised up to 1.0% at the last meeting. No sign of rising inflation today, but then at least the readings were as expected. EURUSD unfazed by the news on the release.
The main event for the day has been the Bank of England meeting. The third and final big bank meeting this week along with the Fed and the BoJ. There was a risk of a downward surprise with the Bank of England, but the BoE kept rates and asset purchases unchanged. However, they opened up the possibility of negative interest rates coming to the UK on this news headline ‘Bank of England says MPC had been briefed on the BoE’s plans to explore how a negative bank rate could be implemented effectively’. Also there was some ‘battle planning announced’ ahead for Brexit blues. All in all, GBP negative.
Well that’s all folks from me today. Scheduled back tomorrow for my last day before Justin returns after his well earned holiday.