BoE expected to cut rates this week  - Scotiabank

Shaun Osborne, Chief FX Strategist at Scotiabank say they expect Bank of England to cut by 50bps cut to take the overnight rate to zero this week and leave the door open to a boost for QE in August.

Key Quotes

“Many expect the BoE to ease policy this week; most expect policy makers to cut the overnight rate 25bps after Governor Carney gave strong hints that policy easing might be required in the aftermath of Brexit. Our view is “why wait”? We expect a 50bps cut to take the overnight rate to zero this week and leave the door open to a boost for QE in August.”

“The BoE is not standing in the way of a lower GBP and, in fact, has suggested that the lower exchange rate will help the economic adjustment. We look for new lows this week on more aggressive policy steps than the street is expecting.”

“GBPUSD short-term technicals: neutral/bearish—Intraday price action looks modestly constructive but we see good, short-term resistance around 1.2980. Above here may see spot return to the 1.31/1.32 range near-term but we expect 1.3140/50 resistance to cap.”

“Broader trends and momentum indicators remain bearish and we continue to think that lower levels are very likely going forward. Minor gains are an opportunity for GBP shorts.”