The Great British Pound moved higher through trade on Thursday edging toward 1.30 on renewed hopes Britain will strike an agreeable divorce deal with her European counterparts. Sterling faced early pressure and moved toward intraday and two-week lows at 1.2858 in the wake of the Bank of England’s monetary policy decision and accompanying the market statement. The Bank cuts its forecast for growth, citing the worst pace of expansion in 10 years, blaming Brexit vagaries and instabilities, affirming rates will remain on hold until a clear path to separation is complete.
Having lost half a percent in the immediate aftermath Sterling found support as investors dove deeper into the policy decision. The BoE was largely balanced in its assessments, and while growth remains a concern, it intimated at raising rates once a deal is struck, holding onto expectations the economy will rebound once the period of uncertainty has passed. Further support came with the promise of additional stimulus should the deadline arrive, and no deal has been reached.
Attentions now turn back to ongoing Brexit discussion as Prime Minister May pleads with EU negotiators to work with her in amending the current deal to ensure its passage through UK parliament. EU official appears steadfast in their resolve, adamant no new deal will be negotiated and subsequently increasing the likelihood the planned vote to approve the exit strategy on February 13 will be rejected forcing UK lawmakers to consider an extension to article 50 again. We are still looking for volatility on headline news with upside gains limited to 1.31 unless a deal is struck.