A few thoughts following yesterday's surprise change in the BOE MPC vote
Yes it was a surprise and the robots unsurprisingly took the pound up in rapid fashion, which suited me and I was able to sell around 1.2800 from the 6th tee at the charity golf day to which I had a long standing corporate commitment hence my early departure.
I did say in my preview that all eyes would be on the vote count and so it proved.Selling the rally earned me a few pips into 1.2730 but did nothing for my golf as I then spent most of the round referring back to my phone on the quiet and not really focussing on the task at hand!
So the vote went to 5-3 but does that mean a rate hike is any closer to reality? One of the hawks, Kristin Forbes, is leaving the MPC next month and her replacement Charlotte Hogg has already been forced to resign for failing to fully reveal some family connections. So in the absence of any others being recruited we're down to a vote from 7 MPC members.
More/as importantly though are the prevailing economic conditions. The rise in inflation outstripping wages is obviously causing some concern but do/should the BOE really want to hike rates to slow that down when they've already said they expect CPI to peak lower and sooner than expected previously. In any case would they really want to increase household debt costs even further at a time when wages are stalling ?
The jury remains out given the pound's reaction so far with plenty of other issues affecting p/a for the moment not least of which a fragile govt still trying to secure a deal with the DUP.
I still say we won't be seeing rate rises for a long time yet and will continue to play from the short side albeit with on-going caution given the Brexit-related upside risk should a softer deal gain more credence.
GBPUSD currently 1.2770 with a few option expiries lending some support between 1.2750 and 1.2700
Carney- Inflation a concern but can they really hike rates?
