Good morning and happy Friday. The sun is beaming down on the City today – perhaps the weather gods are happy with a certain BoE meeting yesterday, I know GBP buyers should be. The pound experienced a much needed relief rally, moving from a low of $1.3102 to a high of $1.3270 where it has opened this morning as the BoE kept the Bank rate at 0.50% . The focus was never going to be on the decision on rates itself, however; instead, the key point was to determine whether there was still a chance that the committee could raise rates in August. The shift towards a more hawkish 6-3 vote clearly means that it can. Moreover the minutes to the meeting, released alongside, were upbeat. Members seem more convinced that the soft patch in the first few months of the year was temporary. Specifically GBP buyers should be thanking the BoE’s Chief Economist Andy Haldane who joined Ian McCafferty and Michael Saunders in favouring a 25bp hike and who caused the market-implied probability of a 25bp rate increase in August to jump to 66% from around 49% before the central bank’s announcement.

Looking at the meeting in more detail, from a domestic perspective the committee identified that indicators of consumer expenditure have strengthened, stating that ‘downside risks that had been implied by a number of household sector indicators had dissipated’. From a cost perspective the minutes confirmed that the strengthening in global energy prices implied a firmer CPI profile over the next six months, a trend which would be reinforced if sterling’s recent weakness were to persist. Members agreed that pay and domestic cost growth had ‘continued to firm broadly as expected’. Against this the MPC seemed less convinced by overseas growth prospects, mentioning a possible loss in global growth momentum over H1 this year and making a reference to global trade tensions. Indeed reports from the ECB’s conference in Sintra, Portugal suggest that central bankers in general are privately more concerned about the impact of trade frictions than their public comments might suggest. Even so, we were a little surprised by just how upbeat the overall  tone of the minutes was.

In other news, equity markets, after showing signs of improvements on Wednesday, took a dive on Thursday with most major indices ending in the red across the board. The S&P500 declined 0.6% and the NASDAQ shed 0.9% as online retailers, including Amazon, weakened after a US Supreme Court ruling which allows states to force online retailers to collect sales taxes. Notably, the Dow Jones slumped for an eighth straight session, as industrials wobbled again on trade war concerns.

Very quiet today with the beginning of the two-day OPEC meeting and this morning’s Eurozone Flash PMIs worth noting. Over the weekend, keep an eye on any headlines regarding the emergency EU meeting on migration. The German Chancellor Angela Merkel is set to try and persuade other EU leaders to further curb immigration and restrict movement of asylum seekers within the EU to help keep her ruling coalition from crumbling at home. Sources suggest Germany would want the Sunday meeting to produce a commitment from states like Greece and Italy to take back asylum-seekers who make it to Germany with any agreement helping Merkel’s stand-off with her coalition partners the CSU. 

As many of you know, we have outgrown our current 2 Gresham Street premises and will soon be heading to our new building, 30 Gresham Street in a few weeks. Last night was the farewell party for our current home and whilst I will personally miss the glass-walled atrium and all of the window light, I do appreciate it’s important not to stand still in life! Having reviewed our options, we decided on bigger and better offices down the street. It is certainly an exciting time for the next stage of growth for this wonderful bank. When it comes to your FX policy, it’s important to also not stand still and to build in a consistent review process of your policy, be that semi-annually or annually. A number of things can change over time (your hedging objectives, your risk appetite, the market volatility, your budget rates, the competitive landscape etc.) Furthermore, hedging solutions are ever evolving too, so it’s important to keep close with your Investec Dealer who is and will be even more perfectly placed (in our new building!) to help you formulate the best plan of attack!