The Bank of England left rates unchanged after a 5-4 knife-edge vote, with Governor Andrew Bailey making the final decision to put 2 years of tightening on hold, leaving the Central Bank’s benchmark rate at 5.25%. This decision came in as a surprise, and although the BOE’s guidance suggests further tightening in case inflationary pressures persist, the data has turned dovish and should not cause any alarm that would lead to further hikes. In conclusion, the BOE may have reached the end of its hiking cycle.
The yen has weakened past the 148 level against the greenback after the Bank of Japan left its policy unchanged and offered no clear guidance on a potential shift in its policy stance. EUR/USD trades mid 1.06-1.07 ahead of today’s Eurozone, Germany, and France PMIs. GBP/USD continues to lose, holding under 1.23 after UK Retail sales for August accelerated, showing that shoppers got back to the stores following July’s rainy weather. EUR/GBP sits at 0.8679, not far away from key resistance at 0.87, July’s high, where the BOE surprised the market with a pause. AUD/USD gains, holding above 0.64.
Have a good weekend.