Flash: All morning eyes fixed on GBP and the BoE Inflation Report - BTMU

FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that further evidence of disinflationary pressures in Europe was evident yesterday with inflation surprising sharply to the downside in the UK.

Key Quotes

“Inflation declined sharply in the UK with the annual core rate declining by 0.5 point to 1.7% in October. It provides an even more favourable backdrop to the release today of the BoE’s latest Quarterly Inflation Report.”

“We expect the report to include: i) modest upward revisions to the growth outlook, ii) modest downward revisions to the inflation outlook with a lower perceived probability of the inflation knockout being triggered, and iii) modest downward revisions to the unemployment rate projections signalling a higher probability that the 7.0% threshold will be reached by late 2015 rather than by mid-2016.”

“The release of the latest UK employment report today may also reinforce market expectations that the unemployment rate threshold will be reached even earlier providing modest support for the pound, with the unemployment rate expected to fall to 7.6%.“