The BoE voted to leave rates unchanged at 3.75% for a fifth consecutive meeting, in line with expectations. The vote split was 6-3, more hawkish than the 7-2 split expected, with 3 voting to hike rates by 25 bps. Policymakers say they stand ready to act if needed.
The decision comes as inflation in June cooled to 2.6% YoY down from 2.8%. However, oil prices have jumped 20% in July as tensions between the US and Iran ramped up and oil supply concerns mounted, clouding the inflation outlook. Policymakers also noted slowing growth and rising unemployment which tempers the hawkish stance. The BoE forecast inflation at 3.2% at the end of the year, slightly cooler than previously projected.
The market is now pricing in 40 basis points of rate hikes by the end of the year. The market prices in just over 50% probability of a September hike.
As a result, the pound is almost unchanged versus the USD and the EUR after the meeting, and the FTSE 100 trades +0.36% around a record high.
GBP VS DOLLAR (GBP/USD):
If we take a closer look at the technicals, GBP/USD has broken out of its descending channel and has risen above the 200 EMA on the 4-hour chart to a high of 1.34. Buyers, supported by momentum, could look to rise above 1.34 towards 1.3450. Support is seen at the 200 EMA at 1.3360.
FTSE 100 (UK100):
The FTSE 100 has formed a series of higher highs and higher lows rising to a record high of 10,980. Buyers will look to extend gains towards 11,000, the record high. Immediate support can be seen at 10,800, the rising trendline support. Below here the 50 EMA comes into focus at 10,750 ahead of the 200 EMA at 10,580.
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