The British Pound continues to move ahead in today’s trading session after yesterday’s surge on the back of the decision by the Bank of England to leave interest rates on hold for the time being
The official rate now remains at 0.75 percent, and in the end only two members out of nine from the Monetary Policy Committee opted to vote for a cut in rates.
Before the rate decision, the market had been evenly divided, with odds standing At 50/50 that a rate cut would be delivered so it did come as little bit of a surprise.
Following the rate decision, BOE Governor Mark Carney noted that there are some good signs developing but the central Bank would be keeping a close eye on future economic data which probably leave a rate cut on the table down the track should things turn sour.
“To be clear, these are still early days. It is less of a case of so far, so good, than so far, good enough, when referring to UK economic data. It will be important for the hard data on activity to follow through on the recent pick-up in the surveys, and for domestic price inflation to strengthen." Mr Carney said.
Some see the pounds gains as short lived with a rate cut is still firmly being on the table and the next month or 2 will be critical and highly connected to negotiations between the EU and UK on a future Brexit deal after the later formally leaves the European union today.
"We would argue that a lot has to go right for the BoE to avoid monetary easing from here and we see numerous risks, most of which are to the downside," says Derek Halpenny, Head of Research, Global Markets EMEA at MUFG
"A more muted bounce in domestic demand will see Pound gains reverse. The productivity assumptions of the BoE if realized is bad news for the Pound and no justification for any sustained rally." He added.