GBP flows: GBP weaker as BoE MPC vote 5-4 for no change in rates
GBP lower after 4 MPC members vote for a rate cut. Yesterday's 0.8830 high in EUR/GBP a target
GBP is marginally softer after the BoE voted 5-4 for no change in rates. The consensus had been for a 6-3 vote. BoE governor Bailey voted with the hawks but he indicated that the risks were now more balanced. It’s now hard to see how we will not get a rate cut in December if the November 26 Budget produces the expected sharp fiscal tightening. Indeed, we wouldn’t rule out a 50bp cut. There should consequently be scope for further GBP losses from here, with the market not yet fully priced for a 25bp cut in December. UK 2 year yields are down 3bps, supporting a test of the 0.8830 EUR/GBP high reached yesterday. Longer term, we still look for a move up towards 0.90 as UK and Eurozone real yields converge.
