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Event Guide: BOE Monetary Policy Statement November 2023


Heads up Sterling traders! The latest monetary policy statement from the Bank of England is here, likely to get the pound rolling this week!

What’s expected from the Monetary Policy Committee this time and how may the British pound react in the short-term?

Event in Focus:

Bank of England Monetary Policy Statement for November 2023

When Will it Be Released:

November 2, Thursday: 12:00 am GMT

Use our Forex Market Hours tool to convert GMT to your local time zone.

Expectations:

  • The Bank of England is expected to hold the official bank rate at 5.25%
  • The Monetary Policy Committee is likely to vote 7-2 in favor of holding vs. hiking

Relevant U.K. Data Since the Last BOE Statement:

Arguments for Hawkish Monetary Policy / Bullish GBP

U.K.’s headline CPI remained at 6.7% y/y in September (vs. 6.6% expected); core CPI eased from 6.2% to 6.1% y/y (vs. 6.0% expected)

On Oct. 9th, Bank of England policy committee member Catherine Mann commented that as long as inflation remains above target, central bankers will need to stay aggressive in reacting to it

U.K.’s monthly GDP came in at 0.2% in August as expected vs. a -0.6% m/m fall previous

Arguments for Dovish Monetary Policy / Bearish GBP

U.K.’s jobless claimants swelled from -9.0K to 20.4K in September

BRC: U.K.’s annual shop price inflation dropped from 6.2% to 5.2% in September, the weakest since August 2022

U.K.’s retail activity slowed down by -0.9% in September (-0.3% expected, 0.4% previous)

U.K.’s wage growth slowed down from 8.5% to 8.1% in the three months to August compared to a year ago; pay growth excluding bonuses also dipped from 7.9% to 7.8% in August

S&P Global / CIPS Flash United Kingdom PMI for October: “Another solid decline in backlogs of work suggested a lack of pressure on business capacity in October. This resulted in reduced staff hiring, with private sector employment decreasing for the second month running.”

S&P Global / CIPS Flash United Kingdom PMI for October: Input prices inflation slowed for the third month in a row, but price charged inflation accelerated to a three-month high.

U.K.’s house price index was -0.4% m/m in September, down -4.7% y/y – Halifax

Previous Releases and Risk Environment Influence on GBP

September 21, 2023

Overlay of GBP vs. Major Currencies Chart by TV

Overlay of GBP vs. Major Currencies Chart by TradingView

Event Results / Price Action:

In September, the Bank of England’s Monetary Policy Committee voted 5-4 to hike interest rates, vs. expectations of a 7-2 vote to hike vs. hold.

A less hawkish event was already anticipated (and generally priced in), but with two more members voting to hold than expected, it really brought out Sterling bears on expectations that this may really be the peak for the BOE’s rate hike cycle.

Risk Environment and Intermarket behaviors:

Slowing growth updates and rising bond yields (which spiked higher as inflation remained sticky and central banks remained hawkish) had traders leaning broadly risk averse, most notably seen in falling equities and oil prices.

This was especially apparent after a more hawkish than expected FOMC statement, which reported a smaller potential rate cut in 2024 to only 50 bps, support the “higher for longer” interest rate narrative. This spiked bond yields higher, as well as the Greenback, adding further weakness to risk assets and even gold before the week was over.

August 3, 2023

Overlay of GBP vs. Major Currencies Chart by TV

Overlay of GBP vs. Major Currencies Charts by TradingView

Event Results / Price Action:

In August, the Bank of England raised its key interest rate by 25 bps as expected to 5.25% and warned that interest rates will likely stay high for some time. There was an immediate bullish reaction in the British pound as the market didn’t get the “dovish hike” some were expecting. Aside from the “higher for longer” interest rate environment warning,  eight members voted for the hike vs. an expected seven members out of the nine.

Risk Environment and Intermarket behaviors:

Mixed economic data results and headlines lead to mixed price action and sentiment for this week as bond yields and the U.S. dollar saw green, while crypto, equities and gold trended lower.

This was likely due to traders pricing in high interest rate expectations (global PMIs continued to flash rising cost burdens for businesses), and that those high rate expectations would likely drag  global growth lower ahead (signaled by lower business activity updates from China and Europe).

This was also the week where Fitch downgraded U.S. long-term credit grade from AAA to AA+, sparking quick fears on the financial stability of the U.S.

Price action probabilities

Risk sentiment probabilities: 

The forex calendar for this week is stacked with top tier events, and when combined with the conflict in the Middle East where sentiment can go from calm to negative and back in a flash, gauging risk sentiment is going to be a tough job this week.

Overall, though, with generally sticky inflation updates and central banks remaining in a hawkish posture on the their fight against inflation, interest rate expectations / bond yields will likely remain elevated. The upcoming FOMC statement will likely be the biggest catalysts on whether this theme strengthens or weakens this week.

This situation coupled with a steady undertone of geopolitical fears will likely keep major risk-on sentiment from popping out of the blue, barring a very low probability scenario of a major positive development on the geopolitical front.

British pound scenarios

Potential base case: 

U.K. growth and prices data has continued to trendline lower/slower since the Bank of England said in September that they were no longer in a clear phase where rate hikes were needed. This prompted a big fall in Sterling against the majors in September, followed by a mixed (but arguably net positive) performance in October.

Falling price growth rates and economic growth metrics point to the MPC holding off on hikes once again, but the rate of price growth is still far from being low enough to warrant talks or considerations of future rate cuts.


This all points to very low odds that interest rates will change, so the drivers of potential British pound volatility will likely come from the vote count, and any changes to expectations on when inflation targets may be hit.


Their last forecast was back in August with their Monetary policy report, where they shared their expectation that inflation to reach 2% by Q2 of 2025. In that report, they also expected GDP growth to remain below pre-pandemic rates, potentially through 2024 and early 2025.

If they lower their GDP growth expectations and/or signal a longer path to reaction inflation targets, that supports the “stagflation” narrative for the U.K., which may draw in bearish pressure in the short-term.

If this scenario plays out and Sterling bears do show up, bearish opportunities on Sterling may be best against currencies that Sterling has done well against in October like the Kiwi, Loonie, and Aussie. The odds of success rise, too, if broad risk sentiment leans more positive as the week rolls on.

On the other hand, if broad risk sentiment begins to learn more negative, Sterling bears may have the best chance of success against the Greenback, Swiss franc and euro.

Overall, there are several factors traders will consider before picking a directional bias, so the best practice is likely to wait for the event outcome and assess the reaction before putting together a risk management plan.

Based on the last two releases where trends did emerge after the event, taking an hour or so to plan right may mean you won’t have to give up much pips in order to raise the odds of success.



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