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GBP: Strong domestic demand will force the BOE - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 18, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, suggests that the retail sales yesterday in the UK pointed again to the risk that the BOE is being far too complacent in its outlook for the UK economy and the potential for them being viewed as being behind the curve.

    Key Quotes

    “The BOE already admit that credit is surging while the retail sales data yesterday again showed strong demand. The volume of retail sales jumped by a much stronger than expected 1.7%, helped by Black Friday discounting. But the value of retail sales jumped by only marginally less (1.4%) so discounting doesn’t explain it all and underlying demand remains robust.”

    “The pound is also falling now on a trade-weighted basis and further modest declines would take it back to levels from Q1 of this year meaning the annual change in the value of the pound will decline toward zero percent. All of this and the QIR already has the BOE projecting inflation at over 2.0% in two and three years out. There is little scope for continuing to signal to the markets no appetite for monetary policy change but until the BOE signals a change the pound may have further to fall.”
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