BoE Preview: Marching toward May – TDS

Analysts at TDS expect the Bank of England's MPC to unanimously vote to keep Bank Rate on hold at today's decision and then expect the MPC to hike 25bps in May before pausing for the rest of 2018.

Key Quotes

“There is unlikely to be any notable change in the MPC's communication, which could surprise market participants looking for a repeat of last September's message when the BoE set up its November rate hike.”

“Rates: With the BoE less likely to send any further hawkish signals, we see performance potential in the September/ December short sterling contracts. With the pace of hikes being under-priced in 2019, we also favour front-end steepeners in the Sonia curve.”

“FX: Sterling could get a tailwind next week as the BoE moves toward a hike, but the Brexit backdrop gets noisy around the EU Leaders summit. Despite this, we expect EURGBP to retain a heavy tone into the meeting. We remain short the cross and look for a break below 0.8687 in the weeks ahead.”