Sterling falls after BOE policy decision

Sterling lost some ground after the Bank of England’s MPC voted 7-1 to leave interest rates unchanged – there had been some expectation in the market that there might have been 2 votes for a hike. The MPC said interest rates may have to eventually rise if the economy evolves in line with its expectations, though a first hike still seems some way off. Sterling is currently trading at just under $1.29 against the dollar and 84.3p versus the euro

In its latest Inflation Report, the BoE forecasts annual GDP growth of 1.9% this year, a touch lower than the previous estimate of 2.0%, followed by 1.7% in 2018 and 1.8% in 2019.  Inflation is expected to rise to 2.8% in Q4 of this year, before moderating slightly to 2.4% in Q4 2018 and 2.2% in the same quarter in 2019

In its Spring economic forecast, the European Commission expects Euro area growth to remain steady at 1.7% this year and 1.8% next year, largely unchanged from its previous set of forecasts in February

ECB vice president Constancio says that “loose for longer (monetary policy) is less risky than a premature withdrawal of stimulus”, and that the ECB needs to be sure about the sustainability of inflation towards its target. He also stated that the ECB is explicitly committed to its current policy until December this year, but will discuss the outlook for 2018 QE in the autumn

Data due today includes industrial production in the Euro Area and CPI, retail sales and consumer confidence in the US