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BoE provides little support for pound in the near-term - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 5, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Lee Hardman, Currency Analyst at MUFG, notes that the pound has weakened modestly following yesterday’s BoE policy announcements.

    Key Quotes

    “The BoE provided an increasingly cautious monetary policy stance which is understandable given the heightened uncertainty from building downside risks to global growth and the upcoming EU referendum. The BoE signalled that it is no hurry to begin raising rates this year as inflation is expected to remain below 1.0%. The BoE did provide some soft pushback against current pessimistic market expectations that there will be no rate hikes until 2018.

    Inflation is expected to modestly overshoot their target in the medium-term based on the assumption that rates begin to rise from Q3 2017 implying the BoE expects to begin raising rates in the first half of next year. However, such soft pushback will provide limited support for the pound in the near-term. The pound will increasingly be driven by heightened uncertainty over the outcome from the upcoming EU referendum in the coming months favouring further weakness and more volatility. The outlook for BoE policy could change significantly depending on the EU referendum result.”
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