Talking Points
The Bank of England has lowered its inflation forecasts marginally for the next three years (2014-2016), and as a result the market has interpreted the shift in tone as a signal that the first rate hike away from the all-time low of 0.50% is still well-off into the future. Citing excess slack in the economy (with about 1-1.5% still remaining), there is still room for the economy to grow before a tightening of monetary policy is required.
The backdrop of weaker expected inflation allows the BoE to keep interest rates lower for longer, and as a result the British Pound is under pressure across the board, posting all-too-similar patterns versus the Australian Dollar, the Japanese Yen and the US Dollar -- it's very possible that the entire European currency complex is seeing a sea change at the moment.
--- Written by Christopher Vecchio, Currency Analyst.