Commenting on today’s MPC vote and how the search for Carney’s successor adds another layer of uncertainty, Olivier Konzeoue, FX Sales Trader at Saxo Markets, said: “Very little was priced in terms of monetary policy for today’s BoE meeting and rates were left unchanged as expected but the committee should be more inclined to make a move at the January meeting. Uncertainty implied by Brexit keeps weighing on UK’s growth and as the election campaign is stepping up a notch. The Bank of England’s policy reaction function to the election will remain a moving target, hence we will keep on monitoring MPC Members in order to find clues on their approach to the different potential outcomes. Carney focused on worsening global risks and remained cautious with regards to what the MPC could expect from the government in the next few months but made reassurances that he would work towards a smooth transition both for Brexit and for his successor.
“A Tory majority, i.e. an orderly Brexit, would see a rise in rate hike expectations in the foreseeable future as any Brexit Deal would be deemed positive for the UK Economy as Carney has stated in the past. On the other hand, the prospect of a second referendum would further delay Brexit and would therefore affect the shape of the rate curve. This is the task ahead for the next Governor and ultimately what matters for markets at present, more than Carney’s successor although this adds another layer of uncertainty.”