(20 DECEMBER 2018)DAILY MARKET BRIEF 2:British interest rates stuck

The Bank of England has no choice today but to maintain its monetary policy rate, unchanged since August 2018. Following the vote of no confidence from last Tuesday and convincing talks with the EU relating to the Irish backstop, the BoE will not move. Inflation accelerated moderately in November, with annual and monthly CPIs given at 2.30% and 0.20% (prior: 2.40%, 0.10%). The scenario of a Brexit deal, with a little less than 100 days to go under current deadline term, does not provide the central bank enough room of manoeuvre, as cases of deal or no-deal would render totally different effects on the British economy. The British pound, which largely recovered from yesterday’s dovish rate hike from the Fed, is expected to weaken further, as monetary policy remains paralyzed under such circumstances. The cable is currently given at 1.2682 (year-to-date: -6.06%), gaining 0.36% from yesterday’s Fed hike. Short-term, GBP/USD is expected to drop following BoE announcement, heading along 1.2605.