BoE Releases Quarterly Inflation Report

The Bank of England Inflation Report and comments from Mark Carney brought sterling’s surge to an abrupt end this morning with the lights well and truly being turned on at the post-election party. A clear shift in tone sees a less upbeat UK outlook, resulting in growth forecasts being cut and monetary policy expectations being dealt a blow.

What most caught the attention of currency traders from the Bank of England governor’s accompanying comment was his specific reference to the EU referendum and the risks it poses to the UK’s prospects. The pound’s unfavourable response sees the first signs of a direct market reaction to this core Conservative agenda item, graduating this event from media chatter to being a genuine driver of the pound’s value. Markets are busy digesting the comment more broadly, but Carney’s mention of the EU referendum and sterling’s directional response cast an ominous shadow that looks set to linger.

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