By interest rate differentials, the GBPUSD is underway to lower ceiling, the GBPCHF is underway to upper ceiling and the GBPJPY is underway to upper ceiling. Both and carry traders are regulated by the policy to manage and maintain the price stability of medium term by their interest rate differentials, thus the sterilization made by the BOE from 1.2500 to upward and the carrying made by the CHF at 1.2400 and the carrying made by the JPY at 134.50 are all in compliance to the policies.
Based on the measurement of the target zones, the GBPCHF target zone is estimated to 1400 PIPs and GBPJPY is estimated to 2000 PIPs, at such the price movement of GBPCHF from the lower ceiling 1.2400 to 1.3800 is in compliance to the policy, and similarly the price movement of GBPJPY from the 134.50 to 154.50 is in compliance to the policy. The carry trading activity by the carry traders to allow the BOE not to undertook market sterilization and this is called "the honeymoon affect" by Paul Krugman on his currency band theory. After reaching the central bands/central parities, both CHF and JPY dispose their carrying (unwinding) for profit booking and to pressure the GBPUSD back to downward in parallel to her actual price trend.
CHF and JPY carry traders may re-carrying the GBP to the level of GBPCHF 1.3800 and GBPPJPY to the level 154.50 and the impact of their carrying on GBP may lifting the price of GBPUSD to her central band/central parity at 1.3375/1.3300. AND, GBPUSD already reached the 1.3375/1.3300 the new upper ceiling of her interest rate differential price. Therefore, I quoted on my latest analysis that GBPUSD on-hold at 1.3300. The CHF and JPY may carrying and re-carrying the GBPCHF and GBJPY however their impact on GBPUSD will be fluctuated interior the current monthly band/ceiling, or "sideways" until both CHF and JPY complete their carrying as permitted by the policy.
The current target zone for EURGBP is 500 PIPs with medium term trend of medium term exchange rate target zone to downward. Both GBP and EUR are being carried and re-carried and result the EURGBP to flat and sideways due to their narrower target zone.
At the inception of currency band theory into monetary structure by the OECD, IMF/BIS and the global central banks as the tool for equilibrium exchange rate theory and target zone theory, the BOE is the first practitioners of currency band management of G5/G7/G8 (Plaza Agreement, Louvre Accord, EMS Treaty). However, long before the inception of the theory into policy, the Swedish has been practicing the theory at which place Paul Robin Krugman undertook his research on his currency band theory. Moreover, long before that the Chinese has been practicing the currency band theory in "basket currency". This theory replicated by George Soros by introducing his theory and strategy of trading from "disequilibrium to equilibrium" and from "near disequilibrium to equilibrium" most popular in the market called "theory of reflexivity". Both Williamsons and Krugman were economic advisor to Soros and this is disclosed in wikipedia in the past but now deleted.
The Bank of England voted unanimously to hold the Bank Rate at 0.75 percent during its first policy meeting of 2019 and reaffirmed its pledge to gradual and limited rate rises over the forecast period. The central bank lowered its 2019 economic growth forecast to 1.2 percent from its previous estimate of 1.7 percent amid persistent concerns about Brexit uncertainty and global slowdown; while inflation is expected to decline to slightly below the MPC’s 2 percent target in the near term, largely due to the sharp fall in petrol prices.
The MPC’s latest projections for inflation and activity are set out in the accompanying February Inflation Report. They are conditioned on a smooth adjustment to the average of a range of possible outcomes for the UK’s eventual trading relationship with the European Union and the gently rising path of Bank Rate implied by market yields.
The world economy has continued to slow over recent months, with a broad-based softening across all regions. That deceleration reflects the past tightening in global financial conditions, as well as the initial impact of trade tensions on business sentiment. Global growth is expected to dip below trend in coming quarters, weighing on UK net trade, before rising to around potential rates. Activity is projected to be supported by the more accommodative monetary policies in all major economic areas that markets now expect.
UK economic growth slowed in late 2018 and appears to have weakened further in early 2019. This slowdown mainly reflects softer activity abroad and the greater effects from Brexit uncertainties at home. These uncertainties could lead to greater-than-usual short-term volatility in UK data, which may therefore provide less of a signal about the medium-term outlook. Heightened uncertainty and elevated bank funding costs are assumed to subside over time, as greater clarity on future trading arrangements is assumed to emerge. These developments, together with looser fiscal policy, provide support to domestic spending. In the Committee’s central projection, quarterly GDP growth recovers later this year, with four-quarter growth rising to 2% by the end of the forecast period.