It's Super Thursday! Which Way Will the Pound Go?

It's Super Thursday! Which Way Will the Pound Go?

The Bank's Monetary Policy Committee voted 6-2 to keep interest rates unchanged at 0.25% and leave the asset purchase programme at £435bn.

Unite said if the BoE fails to resolve the pay dispute, it would consult its members at the Bank in departments other than just maintenance and security on further action.

Michael Saunders and Ian McCafferty were the only members of the monetary policy committee (MPC) to vote for rise in interest rates from their current 0.25% level.

The Bank said it now expects the economy to grow by 1.7 percent this year, down from its May forecast of 1.9 percent and by 1.6 percent in 2018, down from 1.7 percent.

In broad terms, the Bank's inflation forecasts remained similar to the last set: the CPI rate is set to rise to close to 3% in the coming months, and will remain above its 2% target all the way through to 2020.

"The door is still open to a hike, but it doesn't look imminent", Alan Clarke, a rate strategist with Scotiabank said, as quoted by Reuters.

In the U.S., the Federal Reserve is on course to raise short-term rates later this year, while the European Central Bank is to begin phasing out its huge bond-buying programme in 2018.

Craig Erlam, senior market analyst at OANDA, said the Bank's attempts to keep rate hike expectations alive fell on "deaf ears" in the markets.

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The BOE's forecasts continue to assume a smooth Brexit and are based on a rate hike fully priced in by the third quarter of 2018. It kept its 2019 forecast at 1.8 percent.

"Of course, it could perhaps be that traders are only concerned with the near-term expectations of the BoE given its history of bad forecasts and the sheer amount of uncertainty in the economic outlook due to Brexit". One of those voting for higher rates, Kristin Forbes, has now left the Committee, and her replacement, Silvana Tenreyro, is likely to be a dove, having voiced her concerns about a balance between growing inflation and weaker output growth.

Sterling - supported recently on hopes of an interest rate rise - fell back against the dollar in the wake of the Bank's remarks, by nearly a cent, to $1.3160.

The BOE blamed Brexit for a lot of the UK's woes, including weak wage growth. However, it has signalled the end of the Term Funding Scheme, created to make cheap money available to banks.

A series of surveys of Britain's manufacturing, construction and services sectors published this week suggested the economy remained in a low gear in July.

With low unemployment, wages are expected to rise.

The downturn for the British currency may be far from over, said FXTM research analyst Lukman Otunuga, blaming "the unsavoury combination of uninspiring United Kingdom economic data in July and uncertainty surrounding Brexit talks". The latest inflation report from the BoE will also drop today to provide more clues on the MPC's thinking.

The policy makers said United Kingdom wages are expected to "remain subdued" for the rest of the year, while also cutting its salary growth for 2018 to 3% from 3.5% expected previously.

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