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UK Rate Decision

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Strange goings on in GBP, a lift of 150 pip on Tue while it was widely expected BoE would cut interest rates today. Hourly GBPUSD chart nice head and shoulders off the daily resistance level of 13350 with a target around 13200.

 

12:00 Rate Decision and Mon Pol Summary, also released at 12 is the Inflation Report.

 

12:30 BoE Carney speaks on Inflation Report.

 

GBP volatility likely to continue for some time after 12 especially if Carney attempts to link recent downbeat PMIs, inflation, interest rates with a Brexit I told you so.

 



 

 

 

 

 

 

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Is it Carney making this speech or Draghi in disguise?  To paraphrase, "trust me we have more in the armoury and will do what it takes..."  A clear statement that ZIRP is not just on the cards but expected by the MPC.  No chance of a Fed rate rise while all others are cutting, the race to the bottom is back on.  Cue carnage!

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Carney was always onto a winner with this one, if the econ doesn't pull back because of Brexit he will say it was due to his intervention, if the econ does pull back he will say he did what was necessary and is prepared to do more. BoE total asset purchases approaching 500 bln and, as you say, zero interest rates on the way.

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Yeah agree  Brexit is a "get out of jail free card" for Carney, at least for now, I doubt history will look kindly on any of the Central Bankers of the last few decades.  What I really find incredible is that at his last press conference he expressed concern about household debt and now he is trying to make it "easier" for them to become even more indebted (not that I expect to see rates for mortgages or personal loans to fall much or at all).  Equally incredulous is his citing of the UK housing market softness as a concern, which suggests the BoE wants an already over inflated market to get worse!  The housing market has turned and no amount of stimulus will stop that now.  Foreign buyers have all but dried up in central London and stuff is way too expensive for locals.  A clear sign of this is the results of the likes of Foxtons (this will continue on a downward spiral)

 

With UK banks just about squeaking through stress tests how can they issue loans to start up?  Big business is maxed out and used loans to buy back shares and buy other companies in a desperate attempt to find growth and Carney himself almost plaintively appealed to Jo Public to come and get a loan if they have a "good idea" for a business!  Truly bizarre.

 

And now, as I write, the bounce in stocks from the stim announcement looks like it might be reversing.  Central Bankers will be quaking if such stimulus is greeted once again by a negative market response (first time was Japan then ECB).

 

It is truly Alice in Wonderland stuff...  But maybe the cracks are just starting to appear in the looking glass???

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