Preview of Bank of England Interest Rate Decision and MPC Vote
Tomorrow at 1pm GMT, the Bank of England Interest Rate decision will be made public, as well the voting pattern of its decision. Analysts are not expecting any change to the interest rate figure or the asset purchase facility size. These are expected to remain unchanged. However, the MPC vote count is expected to remain at 0-2-7. The MPC vote as well as the statement by the BoE Governor could be the market movers for the GBPUSD tomorrow.
The UK elections are done and dusted, and focus shifts back to Brexit as well as the BoE’s response to the possible scenarios. Despite the mild increase in CPI this morning, the UK’s year on year inflation data is still at its lowest levels in at least 3 years. Therefore, the consumer inflation picture is in tandem with the Bank of England’s outlook and is not expected to come into play in tomorrow’s rate decision.
The important factors that would be under consideration would most likely be the state of Brexit and the impact that the just concluded elections would have on Brexit and economic growth in the UK. The members of the MPC have seen things differently, with at least two members voting for a rate cut the last time. The MPC vote this time around would also be monitored to see if it deviates from what analysts expect. The expectation is for 2 members to vote for a rate cut and 7 members to vote to leave rates unchanged.
How Will the GBPUSD Respond to the MPC Vote and Interest Rate Decision?
The interest rate and asset purchase facility are expected to remain unchanged at 0.75% and 435 billion pounds respectively. If the interest rate is untouched, focus will be on the MPC vote.
A vote which sees more than 2 members voting for a rate cut could be dovish for the GBP, and this could extend the bearish moves for the week towards the 1.2993 price area, which served as the ceiling of the price range that formed between October 17 and December 3. This area was a previous resistance and should serve as initial support to any bearish moves from current price levels. Further downside takes the pair towards the 1.24434 price levels (previous lows of Oct 24 and Nov 8).
On the flip side, if less than 2 members of the MPC vote for a rate cut, this could be seen as a hawkish stance and could be GBP-positive. This may then spearhead a rally towards 1.3175 as the immediate upside target, with 1.3319 lurking overhead.