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What is BoE's Brexit contingency plan? - Rabobank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 24, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Analysts at Rabobank explained that in currencies we saw Brexit fears continue to drag GBP lower, and this morning in Asia it dipped below 1.40 for the first time since 2009.

    Key Quotes:

    "With the UK press filled with Brexit stories, we can certainly expect more volatility there in coming months.

    The BoE yesterday made clear that is has a contingency plan for Brexit, but it won’t reveal what it is, and it doesn’t apparently involve negative rates. That appears to leave a combination of more QE, soothing language, and a nice cup of tea: here’s hoping they do the trick, if needed.

    Of course, a Brexit threat doesn’t do EUR many favours either, although there has been far less reaction on the EUR/USD front so far.

    Yet yesterday’s German IFO survey was a mixed bag. The headline missed expectations at 105.7 (vs. 106.8 consensus) but this was because current conditions rose from 112.5 to 112.9 while expectations plunged from 102.3 to 98.8, the lowest since November 2012, during the tail-end of the pre-Grexit vintage Euro-crisis: that certainly send a further worrying signal. On which note, US consumer confidence dropped much more than expected from 97.8 to 92.2 (consensus was 97.2). Overall the series is still at the bottom end of the bullish channel established since Q4 2014, but it’s a trend worth monitoring."
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