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Release Explanation: It is a detailed record of the BOE MPC's most recent meeting, providing in-depth insights into the economic conditions that influenced their vote on where to set interest rates.
TheLFB-Forex.com Trade Desk Thoughts: The BoE’s minutes from the meeting held at the beginning of May shows that the committee had voted unanimously to maintain the Bank Rate at 50 basis points and continue with the asset buying program, started last month.
Financial market sentiment had generally improved during the month. The three-month LIBOR rate had continued to fall, and spreads over risk-free rates had continued to decline. That might have in part reflected reduced demand by UK banks for this type of funding following the rise in bank reserves generated by the Monetary Policy Committee’s asset purchases. But the narrowing of LIBOR spreads had also been a feature of US and euro-area markets. Major UK banks’ Credit Default Swap (CDS) premia – a measure of likely default on debt – had fallen somewhat, continuing the gradual downward trend apparent since March.
Exports had fallen by 3.7% in the fourth quarter. The CIPS/Markit survey index for manufacturing export orders had picked up more recently. Though it remained just below the “no change” level, April had seen the largest rise in the index for a single month since the series began. The fall in UK exports was likely to have been smaller than the decline in world trade. The fall in global demand had particularly affected certain types of goods, and goods made up a smaller proportion of UK exports than for the world as a whole. Furthermore, it was likely that the downward pressure on UK export growth was being partly offset by the decline in the sterling exchange rate, which had fallen by more than a quarter since mid-2007.
Output had continued to contract across the world, and international trade had fallen precipitously. The global banking and financial system remained fragile. In the United Kingdom, GDP had fallen sharply in the first quarter of 2009, and by more than the Committee had expected at both the time of the February Inflation Report and at the time of its March meeting when it had decided to undertake a £75 billion program of asset purchases. There were some promising signs in a range of surveys that the pace of decline in activity had moderated. But those data provided only an indication of activity in the short run and offered little insight as to how robust or sustained any recovery might be.
Forex Technical Reaction: The pound moved in a wide 45 pip range in the moments following the release but settled near the 1.5510 level, roughly where the pair was trading ahead of the release. The pair has gained 35 pips since the start of the day.