BoE to start first hiking cycle in a decade - TDS

Analysts at TDS expect the Bank of England to hike rates by 25bps this week and it will be the MPC’s first rate hike since 2007, and TDS expect it to be the first of two hikes before they pause again until 2019 as TDS do not expect a “one and done” hike.

Key Quotes

“The vote will not be unanimous—we expect 7 members to vote in favour of the decision (with an error band of +/- 1).”

“Rates: While November rate hike seems like a done deal, the timing of the next rate hike seems to be constantly challenged by markets. We continue to favour 1y1y US vs UK OIS spread widener and Sonia 3y1y-1y steepeners in front-end. Further out the curve bearish forces continue to dominate the Gilt market, in our view.”

“FX: With the ECB moving to a more dovish footing, we see scope for EURGBP to accelerate lower to test support around 0.8745. We see this as a near-term tactical position, however. With November priced with near certainty, the potential to extend further will depend on what signals the MPC sends about the future.”