BoE seen ‘on hold’, GBP still vulnerable – BTMU

Lee Hardman, Currency Analyst at BTMU assessed the upcoming BoE meeting and the prospects for the British Pound.

Key Quotes

“The statement regarding Governor Carney’s future could come ahead of this week’s BoE policy meeting. The BoE is expected to leave policy unchanged now and delay plans to lower rates further. Upside risks to growth and inflation have increased since the BoE’s last Quarterly Inflation Report in August, which should result in upward revisions to their forecasts. If growth continues to prove more resilient than expected it would cast greater doubt over the appropriateness of the BoE’s aggressive easing which is reinforcing pound weakness and increasing upside risks to inflation”.

“However, at the current juncture the BoE is more likely to downplay the firmer growth in the near-term and continue to place more emphasis on their weaker medium-term outlook following the Brexit vote. As a result we do not expect the BoE to provide much support for the pound even if they leave rates unchanged. The BoE would have to shift to a more neutral stance by dropping rate cut signals to offer more support for the pound”.