Did anyone else feel that the release was a little messy?
The pound went for a bit of a ride on the BOE decision as the statement release (on the dot) did not offer anything about tapering whatsoever and the language was more or less the same as in March, and that sent cable lower from 1.3900 to 1.3860.
But when the monetary policy report was released (nearly a minute later, or at least that was what I was getting when refreshing the site), it made a mention to this:
The existing programme of £150 billion of UK government bond purchases had started in January and its
completion was expected by around the end of 2021. As envisaged since the announcement of the programme
in November 2020 and consistent with developments in financial markets since then, the pace of these
continuing purchases could now be slowed somewhat. The expected completion point of the purchase
programme remained unchanged. This operational decision should not be interpreted as a change in the
stance of monetary policy. As measured by the target stock of purchased assets, that stance remained
unchanged. Further details of the planned operational approach to gilt purchases between the May and August
MPC meetings were set out in the Market Notice accompanying these minutes. Should market functioning
worsen materially, the Bank of England stood ready to increase the pace of purchases to ensure the effective
transmission of monetary policy.
The key line bolded but the rest are also noteworthy.
That saw the pound rebound strongly, with cable jumping up to 1.3940 and holding at the highs for the day currently.
The more hawkish forecasts were to be expected and accompanying that, the BOE probably felt that this was a good step in trying to introduce a bit of taper talk to the market.
It is not plain obvious but it is a small step in that direction. The BOE did not want to sound overly hawkish and I reckon they may have just about gotten away with that.
But if anything, I would expect policymakers to start talking up the taper process in the months ahead. That should keep the pound underpinned and a buy-on-dips regardless.
Of note, BOE chief economist, Andy Haldane, also dissented and voted in favour of reducing the stock of QE purchases from £875 billion to £825 billion.
It is but one member for now, but it is a sign that the tides are shifting.
Going back to cable, key resistance is still seen closer to 1.4000 with stronger support still seen nearer to 1.3800 with the 100-day moving average @ 1.3774.