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Bank of England MPC voter split unchanged

Written by Sam Coxhead on April 21st, 2011.      0 comments

8:30 AM (NZT) The Bank of England Monetary Policy Committee meeting minutes revealed no change to the voter split of 6-3 to leave the cash rate unchanged. The comments were not has “hawkish” on the inflationary pressures as some in the market were anticipating and the GBP was softer across the board upon the release. It has since recovered most of the ground lost against most currencies.  With last week’s lower than expected CPI number (released after the meeting was held), we may have seen a little of the pressure released from the Monetary Policy Committee in the short term. My pick would be an August rise at earliest now, and it leaves those looking for cash rate driven GBP strength on the sidelines.  Interestingly , UK inflation expectations for April were released and showed expectations of 2.9% vs 3.5% in March and this is the lowest expectation since September 2010.
Notes from the meeting minutes are listed below:
  • Voted 8-1 to hold QE at 200 bln, Posen still wanted increase 50 bln
  • Balance of risks to mid-term CPI substantial in both directions, not changed enough over month to alter MPC views
  • Hard to know how to interpret March CPI fall, still significant risk CPI will exceed 5% in near term
  • Near-term CPI path likely to be higher than in February inflation report
  • Global recovery unlikely to be greatly hit by disturbances in past month
  • Too early to know whether Q4 slowdown temporary, if weak household demand heralds longer consumption weakness
  • Some MPC thought news on demand/activity over month probably to the downside, rate rise would hit confidence
Elsewhere in the market the “risk on” bias is firmly in place with investors with sold positions in the currencies getting squeezed out and stop loss buying has been evident across many currencies, but most notably the AUD and EUR being up 1.5% and 1.25% respectively. AUD reaching a new post float high of 1.0696.
Strong corporate earnings have maintained the risk on bias, and the stock markets in the US have another up day ahead of the long weekend. Greek bond yields have lunged higher again and has not affected demand for EURO, the market seems to have accepted a restructure is coming. Middle Eastern accounts have apparently been large buyers of EURO and AUD, and will oil consolidating at elevated levels , these petro-dollar flows are seemingly continuous. Keep in mind that current liquidity in the markets is low as we approach the Easter break and any moves made will have been accentuated by the lack of market depth.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7957 0.7879 0.8009
AUD/USD 1.0687 1.0520 1.0694
NZD/AUD 0.7445 0.7441 0.7514
AUD/NZD 1.3432 1.3308 1.3439
NZD/GBP 0.4850 0.4829 0.4868
NZD/EUR 0.5480 0.5472 0.5521
NZD/JPY 65.55 65.06 66.28
NZD/CAD 0.7585 0.7535 0.7612