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GBP: Dovish MPC minutes to weigh on pound – MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 14, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that the pound has underperformed so far this year alongside commodity and emerging market currencies and is unlikely to derive much if any support from today’s BoE’s policy meeting.

    Key Quotes

    “The accompanying minutes are likely to strike a more dovish tone displaying greater concern over downside risks to economic growth in the UK and inflation from negative external developments. The price of crude oil has declined by around 20% over the last month which if sustained will delay the projected pick up in headline inflation into the second half of this. The latest GDP figures also revealed that economic growth moderated by more than expected in the second half of last year.

    In contrast, the outlook for economic growth and inflation is supported by the recent weakening of the pound and lower interest rates as the market expects the BoE to maintain looser monetary policy for longer. Domestic inflation measures also have firmed in recent months. Overall the minutes are likely to signal a more dovish tone supporting current dovish market pricing for the first rate hike not until 2017. The minutes could also reveal that hawkish MPC member McCafferty has re-joined the consensus and voted to leave the policy rate unchanged at today’s meeting.”
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