Sterling lower post BOE

Sterling fell following yesterday’s Bank of England (BOE) interest rate decision, weakening to lows of around 88.4p and $1.3460 against the euro and the dollar respectively before recovering some ground against both. The euro also rose against the dollar after slightly softer than expected US inflation data, strengthening to almost $1.1950 though it’s back to $1.19 this morning

The BOE left interest rates unchanged at 0.5%, as expected, and said a further modest tightening of monetary policy would be necessary if the economy evolves in line with its forecasts though any rate increases would be gradual and limited. Governor Carney said in in a subsequent BBC interview that a rate hike is likely before then end of this year.

As regards the economy, the BOE expects GDP growth to rebound after a soft first quarter and to average 1.7% in both 2019 and 2020, unchanged from its previous projections, with the unemployment rate nudging down further from its already low level of 4.2% and inflation returning to its target of 2% by mid-2020

Annual headline CPI inflation in the US rose to 2.5% in April, in line with the consensus forecast, but the annual  core rate remained at 2.1% (the consensus was 2.2%). US bond yields edged down after the data, with 10-year yields ending the day about 4bps lower at 2.96%

Data due today includes import prices and consume confidence in the US