The Monetary Policy Committee of the Bank of England voted 8-1 to keep rates steady at 4.5%, according to BOE notes released today. With pre-release speculation centering on the idea that the vote would be a much closer  6-3 or even 5-4, the news that an overwhelming majority of members decided to stay put helped boost the pound which instantly rebounded by 50 points from intraday lows in the wake of the release. Once again Stephen Nickell was the lone dissenting dove, worried about the slowdown in consumption. The rest of the members however, felt that the UK housing market had stabilized and that UK economy was growing to trend. Tonight's news buys cable bulls a momentary reprieve, but just how much additional upside  momentum the currency is able to generate remains to be seen. As we noted a week ago, with US rates expected to rise to 4.75% in March, the pound will generate a negative carry to the dollar for the first time in  more than four years. As those carry costs begin to hit traders daily statements, the pressure to liquidate long pound positions could accelerate.

Meanwhile in Eurozone, again the news offered little direction as German GDP printed in-line at 0% but the weaker than expected Private Consumption component which came in at -0.6% versus -0.2% was offset by better than expected French consumer data which gained 2.5% on a year over year basis against projections of only 1.5% rise. The EUR/USD however barely budged trading around the 1.1900 figure. The pair seems destined to mark a third consecutive day of 50 point range as volatility  has compressed to year low levels. While direction in FX is often difficult to forecast correctly, one thing is certain: as surely as day follows night - low volatility leads to high volatility and the market may soon be ready to burst. The only question that almost on one is able to answer -  which way?

Boris Schlossberg is a Senior Currency Strategist at FXCM.