BoE Decision Leaves British Pound Vulnerable to Policy Shifts

Commerzbank's Michael Pfister notes that the Bank of England (BoE) decision to keep interest rates unchanged has provided limited support for the British Pound. Despite a closer-than-expected vote at 6-3, with three votes in favor of a rate hike, Governor Andrew Bailey emphasized that the BoE is not edging toward tightening.

Pfister reiterates that the BoE will likely delay hikes as long as possible and could quickly revert to cuts if the Middle East conflict ends. This would leave the Pound with little policy support.

The decision has already priced out a few basis points of rate hike expectations, but there is still considerable scope for further adjustments.