Sterling strengthened against both the euro and the dollar yesterday, and is still strong today as the Bank of England voted to keep interest rates on hold at 0.75%. The result was 7 to 2, with officials Michael Saunders and Jonathan Haskel again voting to cut rates.
The BoE noted that the economy had picked up since December’s general election and global growth had stabilised, largely due to a reduction in trade tensions. The markets have slashed expectations for a rate cut in March, reducing the likelihood from 80% to 16%.
This evening, the UK will formally leave the EU at 11pm. We’ll now enter the Brexit transition period, where negotiators have less than 11 months to secure a trade deal. Depending on the progress of these talks, the markets could become nervous, especially if negotiations run right down to the wire. It’s thought that the Prime Minister will go after a Canada style trade deal with Brussels.
