Is the decision today a "hold and we will cut rates later" or a "hold and we may not cut rates at all"?
It looks like the market is starting to lean towards the latter as the BOE and Carney continues to allude to the fact that if economic data continues to show improvement, there may not necessarily be a need for additional stimulus.
Let's not forget that there's also the UK budget announcement in early March and that could provide additional fiscal help to the economy, so there may not be a need for the central bank to double down on that front.
But as mentioned before, the risk here is that the BOE risks falling into the inflation trap. Post-election sentiment may have shown some improvement but will it be enough to get inflation back on track? Only time will tell.
I reckon the pound is now caught in a bit of a dilemma as such. On the one hand, the decision by the BOE to stay on hold today - with some dovish tweaks - doesn't offer much upside potential if economic data remains sluggish or potentially gets worse.
But on the flip side, positive economic developments and inflation not dramatically falling off could spur added bids for a push towards 1.3150 to 1.3200 potentially because the dovish tweaks don't mean much if the BOE is not going to follow through on them.
