Scale and scope of BoE’s easing will cap GBP - Westpac

Tim Riddell, Research Analyst at Westpac, notes that the parliamentary scrutiny of the MPC highlights that the Bank of England seems content with its actions and also the current stable state of the economy.

Key Quotes

“The dangers for the economy beyond initial confidence are yet to develop. Once again, the scale and scope of BoE’s easing will cap GBP. The lack of rebound in the UK/US 2yr spread highlights that GBP stability and minor rebounds have been more about position adjusting with sentiment indicators than fundamentals. The markets will be made aware of the wide visible trade deficit and the need for balancing overseas investment in the face of uncertainty over Brexit. GBP will be the natural balancing tool.

GBP rebounds have been sound, but with a painful trade deficit and BoE easing pressure, GBP is likely to resume its downtrend to retest the Brexit low of 1.2800 and potentially 1.2500.”