On the face of last week’s Bank of England rate decision, it was very uneventful. Rates stayed the same, and asset purchases stayed the same. Some investors had been hoping for a repeat of the Bank of Canada’s hawkish shift by tapering bonds and bringing forward interest rate hikes. The only dissenter to the on-hold narrative was Andy Haldane. However, he is on the way out shortly from the Monetary Policy Committee, so that didn’t register with voters.

Minutes paint a better picture

Looking at the minutes the BoE has adopted a more optimistic outlook for the UK economy. They are expecting the country’s GDP to fall by less than forecast back in February, with the low COVID-19 case numbers and success of the vaccine rollout clearly playing a big part in this. Crucially, there is an expectation that the estimated £150 billion of savings that consumers have accumulated over the past 14 months or so will steadily be released into the economy in the months ahead.

GBP & FTSE reaction

The GBP responded in a confused fashion with the meeting and chopped around before moving sharply higher this week supported by a very poor NFP report.

The FTSE 100 was far more confident and moved higher on the higher growth forecasts. However, the sell-off in stocks has since brought it lower.

June taper

This look like a June taper can now be expected as there have been two upbeat MPC meetings in a row. One approach would be to look for suitable technical areas to buy the GBP into the next BoE meeting. The key risk, as always, is on some kind of vaccine-resistant COVID-19 variant.