GBP: Confusion to reign next week amid BoE policy - ING

Viraj Patel, Research Analyst at ING, suggests that the odds of a BoE rate hike next week are slim-to-none in their eyes, however they do think confusion will reign in GBP markets given the range of conflicting policy signals that are likely to emerge from the Super Thursday event.

Key Quotes

“It could well be a case where the diverse policy views of individual MPC members and greater BoE transparency combine to offer little consensus on the overall policy thinking, with plenty of supporting evidence for both the market doves and hawks to stick to their a priori views.”

“Our base case is for a 6-2 MPC vote split to keep rates on hold, which in theory should be perceived as dovish given that the lack of active dissenters reduces the likelihood of a Nov hike. But this might not be enough to drive GBP materially lower – especially as BoE watchers have been accustomed to more twist and turns in recent months than a Game of Thrones season.”

“What will matter for the pound is which policy factors will prevail and whether Governor Carney’s head is turned by concerns over slowing activity and uncertainties over Brexit or whether it is above-target inflation and the costs of low interest rates in the form of emerging credit bubbles that is keeping the BoE chief awake at night. Sell GBP/$ into the BoE meeting but 1.2850-1.2900 may be the lowest we get.”