There is no opening trade call for the London session as we await the upcoming BOE Bank Rate Decision, Monetary Policy Summary, and Official Votes (12:00pm BST).
The BOE intend to raise rates in 2016, however the market has scaled back these expectations in recent months, which has been witnessed by the drop in GBP. During this time we have not heard any solid commentary from BOE members about how the recent developments in financial markets and inflation will affect their liftoff plan. These minutes may reveal some new information about how the MPC are viewing recent developments. Watch my weekly Forex news event’s overview here or read my full analysis in order to learn about interpreting these particular data points.
As of August 2015, the BOE release their Monetary Policy Committee Meeting Minutes and their Official Bank Rate decision at the same time. The minutes contain the interest rate and asset purchase vote for each of the nine MPC members during the most recent meeting. The breakdown of votes provides insight into which members are changing their stance and how close the committee is to enacting a change in monetary policy. This vote is reported in an X-X-X format; the first number is MPC members who want to raise rates, second to cut rates, third to keep on hold. The BOE release the MPC Rate Statement only when they have changed the OBR, therefore there will usually be no MPC Rate Statement released.
The BOE now also release a Monetary Policy Summary which contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.
On a quarterly basis the BOE also release their Quarterly Inflation Report alongside the aforementioned releases. The QIR includes the BOE’s projection for inflation and economic growth over the next 2 years. The BOE Governor also holds a press conference to discuss the report’s contents after release. The QIR provides valuable insight into the bank’s view of economic conditions and inflation; these are the key factors that will shape the future of monetary policy and influence their interest rate decisions.
Expected Market Reaction:
The initial reaction will come from any surprises in the vote count, with a change back to nine-nil causing downside in the GBP. Conversely if any extra members voted for a hike now then we will see upside in GBP. If the votes are as expected then the language of the statements will be the important factor in determining direction in sterling. The market will be focussed on how the members view recent developments from China and global stockmarkets. If the MPC seems unfazed by recent developments then we may see a rally in sterling.