Thursday's Bank of England meeting failed to provide the Pound Sterling (GBP) with another boost. Economists at Commerzbank analyze GBP outlook.

Disenchanting day for the Pound

Although the market focused on the vote, as we expected, the 8-1 vote was slightly more dovish than the 7-1-1 expected.

In a generally dovish mood on Thursday, triggered by the SNB's surprise rate cut, the Pound took a beating and ended the day as the second worst performing currency. However, it should also be noted that the GBP has enjoyed an extraordinary rally this year, largely based on a general correction in interest rate expectations towards fewer rate cuts (in addition to surprisingly good data). Therefore, if market sentiment turns, the Pound is one of the most vulnerable currencies.

Overall, however, we would suggest that not too much has changed as a result of Thursday's decision. Of course, the Bank of England has taken another step towards lowering interest rates. But whether this will happen sooner than before, simply because no policymaker voted for a hike, is still not entirely clear. Admittedly, the vote is a signal, but even before that, another rate hike was very unlikely.