GBP: Entering a territory that will warrant BoE attention - ING

According to analysts at ING, after a dismal August, GBP looks to be entering a consolidative phase ahead of the upcoming Bank of England (BoE) policy meeting (Sep 14).

Key Quotes

“We believe that both a softer UK economic outlook and domestic political risks are adequately priced into the currency now and only an escalation in either would warrant further idiosyncratic GBP weakness. While BoE officials may state that they are not targeting a specific exchange rate level, we suspect the trade-weighted GBP index around the 74 level - and close to historic lows - is in a territory that will warrant greater attention from policymakers. We wouldn't be surprised to hear greater BoE noise over GBP weakness, primarily in terms of what this means for inflation overshooting the 2% target and whether the growth-inflation policy trade-off has altered for some MPC members. This in itself could provide a backstop to the current GBP-selling environment.”

“Services PMI (Tues), house price data (Wed) and industrial production (Fri) are the key releases to note this week. The House of Commons reconvenes after its summer recess and will vote on whether to take the EU Repeal Bill to the next stage (Wed). While the latest round of Brexit talks failed to churn out any meaningful conclusions - unsurprisingly given the obstacle of the German elections later this month - the limited GBP fallout also implies that markets may already be well-prepared for upcoming political event risks.”