“Our base case sees a 25bps rate cut, as poor data into end-2019 leads to GDP and CPI downgrades. If the BoE chooses to remain on hold instead, we would look for a dovish message, with the door left wide open to a March rate cut.”
“Front-end is pricing only 11-12bps in cuts for January following last week's profit taking activity. Recent strong flattening move in 5s30s curve makes us biased towards steeper curves into the meeting.”
“GBP seems likely to remain more sensitive to virus-driven sentiment fluctuations and ongoing Brexit considerations than BoE policy for now. Our base case suggests some moderate downside GBP risks. That said, the spot may rally sharply on a hawkish surprise if future rate cuts are priced out with confidence.”
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