Talking Points:

- The BOE’s decision to keep rates on hold today marks the culmination of a tumultuous few weeks of trading for the British Pound[1]. - Three weeks ago, odds for a 25-bps rate hike in May were 85%; now, rates markets are barely pricing in one hike in 2018 at all. - See the full DailyFX Webinar Calendar[2] for upcoming strategy sessions. Looking to learn more about how central banks impact FX markets? Check out the DailyFX Trading Guides[3]. The British Pound has been in meltdown mode for the past three weeks, following rate hike expectations every step of the way. On April 19, odds of a 25-bps hike at the May policy meeting were still at 85%, and GBP/USD[4] above 1.4300. But since then, GBP/USD has dropped closer to 1.3500, culminating in the BOE’s May decision to keep their main policy rate on hold at 0.50%. This has been a dramatic change in fortunes, no doubt. And despite BOE Governor Mark Carney’s suggestion that a rate hike will still happen at some point this year, traders seem to have embodied the mantra “once bitten, twice shy.” Rates markets are only pricing in 19-bps of tightening for the remainder of 2018, with the November policy meeting – one of the four per year that is accompanied by a new Quarterly Inflation Report (QIR) – being seen as the most likely period for when the hike would occur (64% implied probability). Table 1: BOE Rate Hike Expectations (May 10, 2018) Central Bank Weekly: British Pound Slides Alongside 2018 BOE Rate Hike Odds If the “once bitten, twice shy” mantra is indeed the motif for traders now, then

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