GBP/USD is down under 1.3100 after recovering to a high around 1.3140 overnight. The Bank of England (BOE) delivered a dovish hold yesterday. The BOE left the policy rate at 4.00% (70% priced-in) and signaled the bar is low to resume easing at the next December meeting, BBH FX analysts report.

BOE signals readiness to resume rate cuts in December

"First, the Monetary Policy Committee (MPC) voted by a slim majority of 5–4 to maintain Bank Rate at 4.00%. Four members (Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor) voted to reduce the Bank Rate by 25bps to 3.75% vs. two members (Taylor and Dhingra) at the September meeting. Second, the BOE stressed that “CPI inflation is judged to have peaked.” In fact, the BOE now sees the risks to the inflation outlook as more balanced versus skewed to the upside previously."

"Third, the BOE removed the word “careful” from its easing bias, suggesting more readiness to cut rates. The BOE stressed “if progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path.” Previously, the guidance was for “a gradual and careful approach” to further rate cuts."

"Bottom line: the BOE is on track to resume lowering rates at its next December 18 meeting (70% priced-in), after the UK Budget is released on November 26. The expected fiscal drag from the upcoming UK budget will likely leave room for the BOE to deliver more easing than is currently priced-in (50bps in the next 12 months). As such, we expect GBP to keep underperforming on the crosses."