Bailey to side with hawks at speech this afternoon
Sterling has largely traded sideways against the euro in the past ten days or so amid a lack of major market moving news out of the UK and the Euro Area.
Investors don’t yet appear to be pricing in too much of an Autumn Budget risk premium, and there certainly seems to be room for the pound to fall should the announcement not calm investor nerves over the outlook for the economy and public finances.
New OBR productivity forecasts will be out today, which itself could open up a near £20 billion fiscal hole in the government coffers. Bank of England Governor Bailey will be speaking at an event this afternoon.
If he does indeed touch on monetary policy, we think that he will side with the hawks and indicate to markets that persistent inflation pressures are likely to put pay to further cuts during the rest of the year.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
