With no expectations from the BOE rate decision, Cable stayed steady in yesterday’s trading. GBP/USD traded well within its daily average true range and closed just 13 pips lower for the day at 1.6320.
As expected, our buddies over at the Bank of England did not make any changes to their asset purchase facility nor did they hike interest rates. This made the BOE rate decision a snoozer, as everyone decided to watch what their European counterpart, the ECB, would do instead.
It seems that BOE officials are still divided as to what direction to take with monetary policy. On one hand, inflation is waxing hot like Blake Lively (have you seen the trailer for Green Lantern!?). On the other hand, it isn’t like the British economy is chugging along like a well-oiled machine. I’m looking forward to minutes of the meeting to see just how divided the BOE could be on this issue.
Speaking of inflation, producer price input figures are due today at 8:30 am GMT. Expectations are that producers are paid 2.2% more for their raw materials. Remember, this report is a good indicator of inflation, as producers are highly likely to pass on any additional costs to consumers to bear the burden. If today’s report comes in to print a higher figure, we could see the pound get a nice boost across the board, as this would raise speculation that the BOE will follow the ECB’s lead in raising interest rates.