BoE should trigger a GBP rally
|Not much has changed in the Bank of England rhetoric. Despite investors pricing in a rate cut by year-end amid slowing manufacturing activity, Brexit uncertainy, and dragging trade discords, BoE policymakers still maintain their hawkish bias, favoring rising rates at a faster pace than financial markets would consider. It is therefore very likely that the BoE statement or policy minutes from Thursday monetary policy meeting will continue to hint towards further tightening, most likely giving British pound a boost. Yet probability of an up-move is still less reasonable under current circumstances.
Despite manufacturing PMI in contraction territory at 49.4 for the first time since July 2016 and y/y industrial production hitting -1% in April and in negative territory for the first time this year, real wage growth excluding bonuses increased 3.4% while unemployment remains at historical bottom, supporting the BoE’s stance. Yet the release of second quarter GDP in 28 June should give investors a good view where the UK economy is heading. Although domestic consumption most likely improved, a fall in fixed asset investments due to potential hard Brexit risk should ultimately weigh on the GDP figure. Accordingly, the likelihood of seeing the BoE raising rates this year is rather low as Brexit scenarios (deal, no-deal and article 50 extension) are still opened following 31 October 2019 deadline.
Stay on top of the markets with Swissquote’s News & Analysis
GBP/USD is expected to gain support amid Fed, BoE monetary policy meetings. Heading along 1.2606 short-term.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.