Bank of England lowers 2019 GDP growth forecast to 1.3% from 1.5% in May

Bank of England lowers 2019 growth forecast to 1.3%.
BoE notes the QIR does not factor in risk of a no deal.
Repeats if Brexit proceeds smoothly, GBP likely to appreciate.

Eren Sengezer FXStreet

According to the updated economic projections in the Quarterly Inflation Report, the Bank of England forecasts the economy to expand by 1.3% in 2019, compared to 1.5% reported in May's publication.

Key highlights from the QIR (via Reuters)

"Inflation report continues to assume a smooth Brexit in growth and inflation forecasts, does not factor in risk of no deal."

"Inflation in one year's time at 1.90% (May forecast 1.72%), based on market interest rates."

"Inflation in two years' time at 2.23% (May forecast 2.05%), based on market interest rates."

"Inflation in three years' time at 2.37% (May forecast 2.16%), based on market interest rates."

"Market rates imply slower BoE tightening than in May, point to bank rate at 0.6% by early 2022 (February 1.0%)."

"Ses GDP in 2019 +1.3% (May forecast +1.5%), 2020 +1.3% (May +1.6%), 2021 +2.3% (May +2.1%)."

"Expects business investment to fall through rest of 2019, cuts forecast for 2020 to -1.5% (May +3%)."

"Labour market no longer appears to be tightening, pay growth stabilising."

"Unemployment rate at 3.7% in two years' time (3.7%), based on market rates."

"Increased perceptions of likelihood of no-deal Brexit have led to "marked depreciation" of sterling."

"Forecasts include some inconsistencies due to perceived risk of disorderly Brexit priced into some markets."

"If Brexit proceeds smoothly, sterling likely to appreciate and market interest rate expectations will rise."

"More consistent forecast would have somewhat lower paths for GDP growth and CPI inflation after smooth Brexit."

"When disorderly Brexit risk stripped out of current market prices, smooth Brexit could still lead to inflation overshoot, based on adjusted market interest rate path."

Markets are now waiting for Governor Carney to deliver his remarks on the policy outlook at 11:30 GMT.

About the BOE interest rate decision

BOE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD falls to near 0.7100 after slipping below 50-day EMA

AUD/USD depreciates after registering minor gains in the previous day, trading around 0.7120 during the Asian hours. The technical analysis of the daily chart shows the pair consolidating sideways within a rectangle pattern, as neither bulls nor bears gain control. The AUD/USD pair is holding a slight bearish tone however as it sits beneath both the nine-day and 50-day EMAs.

160.00: USD/JPY back near intervention territory after upbeat US jobs report

US Nonfarm Payrolls beat expectations by a wide margin in May, with 172K jobs added. The US Dollar rebounds after the release, helping USD/JPY recover from its intraday lows. Warnings from Japanese authorities continue to limit upside potential near the 160.00 threshold.

Gold remains offered below $4,500 following US Payrolls

Gold prices trade with a bearish bias and still remain below the key $4,500 mark per troy ounce at the end of the week. The slighlty softer tone in the US Dollar alongside mixed US Treasury yields across the curve also keep the yellow metal’s downside somewhat contained.

Cardano hits five-year low even as Hoskinson clarifies "break" isn't an exit

Cardano (ADA) price is down 10% at press time on Friday, extending losses over 30% so far this week amid Charles Hoskinson's clarification that "break" isn't an exit.

Week ahead – Fed countdown begins amid US inflation data and geopolitical risks

Fed Chair Warsh’s first meeting approaches as key US inflation data could reshape expectations. Oil prices remain elevated as US-Iran talks continue; tariffs also return to the spotlight. ECB is expected to hike; will it be a one-off move or is July live?

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.