FX Focus

FX BoEFocus Review: Watchful but unhurried 18 June 2026

HENRY COOK • Macro view: The BoE left rates unchanged at 3.75%, as expected. The 6-3 Senior Europe Economist vote split was tighter than expected with Mann joining the dissenters in Global Markets Division for EMEA pushing for a hike. That hawkish shift was more than diluted by messaging T: E: highlighting the strength of domestic disinflation. Across the MPC we see some daylight between the 3 dissenters and the rest and remain comfortable with our call for an extended hold. The bar for a September hike looks a bit DEREK HALPENNY higher after today. Further ahead, we believe that second-round effects will Head of Research, Global Markets ultimately remain contained given the soft macro backdrop. But the BoE will EMEA & International Securities continue to watch for broader pass-through in the survey data, while the Global Markets Division for EMEA argument for pre-emptive tightening will strengthen with each new escalation T: in the Middle East. E: • Markets view: The rates market reaction to today’s BoE announcement has been relatively modest – the 2-year Gilt yield is down about 3bps. There was no notable fresh news and nothing today provides a justification for changing ABDUL-AHAD LOCKHART Currency Analyst our view that the rates market as overpriced for what the BoE delivers. The Global Markets Division for EMEA 2-year yield is 60bps above the official bank rate and given the description of T: domestic economic conditions, numerous rate hikes being delivered is E: unlikely. Yields will ultimately fall back and that is a factor in our view of pound depreciation. The pound gain today was more versus the US dollar but going Research Portal: forward see the retracement of market rates as the catalyst for a move higher Global Markets Research - MUFG in EUR/GBP. Research

Macro view: The BoE currently places more weight on domestic disinflation than geopolitical re-escalation A tighter vote comes with dovish messaging The Bank of England held Bank Rate at 3.75% at its July meeting, in line with MUFG Bank, Ltd. A member of MUFG, a global financial group expectations, and the core guidance of vigilance in the summary was maintained (i.e. “The Committee stands ready to act as necessary”). The 6-3 vote split was tighter than both we and the consensus expected. But the overall tone from the meeting is dovish. The BoE has weighed up domestic disinflation against recent re-escalation in the Middle East and decided that, for now at least, there is no urgency to tighten policy. The bar for a September hike seems higher than it did coming into the meeting.

On the vote split, it was Mann who joined Pill and Greene in voting for a hike, citing the collapse of the US-Iran MoU and broadening of the Middle East conflict as the key change. But Mann dissenting hawkishly is never a great surprise, as we flagged in our preview (see here: Active hold, active debate). Crucially, there seems to be some daylight between the three dissenters and the rest. There was no indication from any of the other MPC members that they had considered the possibility of a hike at this meeting. Lombardelli, who we thought most likely after Mann to shift her vote, said that “it wasn’t a close judgement” in the Q&A.

There was some further clarity from Governor Bailey, who will always be the key swing voter on a divided MPC. He pushed back on the suggestion that tightening is likely. Specifically, he endorsed the consensus view in the MaPS survey which is that an extended hold is most likely, saying: “market participants find it most likely that Bank Rate will remain at its current level throughout this year while investors, quite reasonably, require a premium to compensate for the risk that Bank Rate may have to go up should inflationary pressure from the energy shock prove to be more persistent.” He added “That seems a reasonable position for now” and said to journalists that it is not reasonable to assume that the BoE is edging towards a hike. This is not a Governor who is working to tee up a September move.

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