Pound Intensifies on BoE Rate Decision

Market Reviews

The British pound appreciated significantly after it became known that the Bank of England left interest rates unchanged at 0.5%, and hinted that it could raise interest rates earlier than expected. In the accompanying statement, the central bank noted that the economy should develop in accordance with the February inflation forecasts, and monetary policy might be tightened somewhat earlier and to a slightly greater extent during the forecast period than previously thought. The forecast for GDP growth for 2018 was revised to 1.8% from 1.6%, and to 1.8% from 1.7% in 2019.

As expected, the RBNZ left the interest rate unchanged at 1.75%. Due to an unexpected recession in inflation in the fourth quarter of 2017, politicians revised their inflation forecast. It is expected, that the monetary policy of the bank will remain unchanged until the second quarter of 2019.

The ECB monthly bulletin noted that the continuing broad and strong economic expansion in the euro area is expected to continue in the near future. ECB Chief Economist Peter Praet repeated three criteria for the completion of the asset purchase program: inflation at 2%, there is confidence that inflation would be met on a sustainable basis, and the inflation forecast is not too dependent on monetary support.

German trade surplus narrowed to EUR 21.4b in December. Japan current account surplus decreased to JPY 1.48T in December. China trade surplus reduced sharply to CNY 136b (USD 20.3b) in January.