• BoE Governor Carney gives fairly balanced press conference
  • “We decided to take our foot off the accelerator”
  • GBP drops 1%+ against most crosses; UK100 rallies towards all-time high

Following the momentous decision from the Bank of England to raise rates for the first time since 2007, Governor Carney has conducted a press conference alongside Deputy Ramsden – who incidentally was one of the two dissenters amongst the MPC and deflected a question regarding his reasoning for the dissent. 

Selected comments from the press conference are as follows:

  • Domestic CPI pressures likely to build in the coming years
  • Company balance sheets are generally in a strong shape
  • Brexit-related constraints adding to drag on potential
  • Brexit the biggest determinant for the economic outlook
  • We project 2 further rate hikes over the next 3 year period
  • Inflation approaches 2% target but doesn’t quite get there with 2 rate rises

As the press conference has just drawn to a close we can see that the market expectations for further hikes have been pushed back a little. This morning OIS markets were pricing in an over 50% probability of a next rate hike in May 2018 , but this has since been pushed back until August 2018 – 2 meetings later. Prior to the hike there were 62 basis points (including today’s bs 25 hike) of hikes expected by the end of next year and this has since fallen to 25 (not counting today’s 25 bs hike). This is a drop of 12 basis points or approximately half of 0.25%. 

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The market reaction has been quite clear, with this being perceived as a dovish hike and the pound falling strongly across the board.Source: xStation

The fall in the pound has benefited the UK100 with the stock index rising strongly to trade at its highest level in 2 weeks. The UK100 has been a clear laggard in the recent global stock market rally with the benchmark drifting lower whilst many of its peers have been surging to all-time highs. Today’s trade has seen a large bullish engulfing candlestick form with the past 8 sessions looking set to be engulfed. Today’s high of 7555 has previously acted as a swing resistance but if price can break above here then the all-time high at 7600 could be on tap. 

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 The UK100 has surged higher following the rate decision. Will the market join in the global stock market rally? Source: xStation