4 Aug 2015
Bank of England: Thursday's information overload - UBS
FXStreet (Córdoba) - UBS analyst team anticipates Thursday’s Bank of England monetary policy decision when the BoE will also publish the quarterly Inflation Report, which includes all new economic forecasts by the bank. This will be followed by a press conference.
Key Quotes
“What can we expect? In our view, there will be three important things to watch: 1) The language of the board in the meeting minutes and at the press conference. How do members assess recent economic developments and are they getting closer to a policy rate lift-off date? 2) How members balance news of higher wages against that of lower oil prices and a stronger currency in their new inflation profile. 3) Their interpretation of all this, which will finally be reflected in the voting of the individual members concerning the policy rate decision”.
“In our view, the board will try to sound as balanced as possible about the first two points, keeping the November monetary policy meeting alive for the first rate hike but also not committing to anything. Furthermore, we expect two members within the board to dissent and vote for an immediate rate hike. If this scenario unfolds, we would expect sterling to stay supported and continue to move gradually higher”.
“If the board's focus is mainly on wages, or if there are more than two dissenters, the signal would be very bullish for sterling”.
“If the focus falls on the strength of the currency, or we get less than two dissenters, we believe the currency is likely to suffer a bit. We continue to recommend being overweight GBP and underweight AUD going into Thursday”.
Key Quotes
“What can we expect? In our view, there will be three important things to watch: 1) The language of the board in the meeting minutes and at the press conference. How do members assess recent economic developments and are they getting closer to a policy rate lift-off date? 2) How members balance news of higher wages against that of lower oil prices and a stronger currency in their new inflation profile. 3) Their interpretation of all this, which will finally be reflected in the voting of the individual members concerning the policy rate decision”.
“In our view, the board will try to sound as balanced as possible about the first two points, keeping the November monetary policy meeting alive for the first rate hike but also not committing to anything. Furthermore, we expect two members within the board to dissent and vote for an immediate rate hike. If this scenario unfolds, we would expect sterling to stay supported and continue to move gradually higher”.
“If the board's focus is mainly on wages, or if there are more than two dissenters, the signal would be very bullish for sterling”.
“If the focus falls on the strength of the currency, or we get less than two dissenters, we believe the currency is likely to suffer a bit. We continue to recommend being overweight GBP and underweight AUD going into Thursday”.