1. The Divergence Trap
As we noted in this morning's filter of the Trump address, the US is moving toward a stronger, tariff-protected dollar. The BoE's decision to cut creates an immediate interest rate divergence.
"The Bank is cutting into the face of a trade war. This is either an act of supreme confidence in 2026 inflation models, or an act of fiscal desperation to lower government borrowing costs."
2. Impact on Mandates
Gold Long: ACCELERATED
A central bank willing to cut rates while core inflation is still "stubborn" validates the move into non-sovereign assets. Our $4381 target remains unassailable.
Gilt Short: REINFORCED
A 5-4 split shows a Bank in turmoil. If the market perceives this cut as a "Policy Error," Gilt yields will spike (prices fall) as the risk premium increases. The 6.0% target holds.
3. Conclusion: Filtering the "Good News"
Mainstream narratives will focus on "mortgage relief." The structural filter focuses on **Currency Value** and **Inflation Persistence**. The Bank’s own Governor admits further cuts are a "closer call." This is not a pivot; it is a precarious pause-step in a high-friction environment.
"We respect the fact of the cut, but we filter the rationale. The BoE has chosen to provide short-term relief at the risk of long-term structural instability. We do not change our mandates. We watch the yield curve for the market's true verdict."
This report is for informational purposes only. Position: UK Gilt Structural Short (Hold), Gold Structural Long (Hold).