Bank of England Going Nowhere

May 12, 2016

Volatility risks lie squarely with sterling today, with both the monetary policy decision (together with meeting minutes) falling at 11:00 GMT, with the BoE Inflation Report published soon after. The real interest is going to be with the Inflation Report, where we are going to see a lot of questions regarding the impact of Brexit on the Inflation Outlook. We’re unlikely to see major changes to the inflation outlook over the forecast horizon. On one side, if we look at market based measures of expectations, these have risen modestly since the last Report published in February. Furthermore, interest rate expectations (on Bank of England’s method) will have likely softened on over the past 3 months. On the other side of the equation, we’ve seen some weaker activity data over past few months, which could offset. Morgan Stanley’s measure for the length of time for the first hike currently stands at 40 months, which remains far longer than most economist and other pundits are looking at. With the first hike priced so far ahead, it’s hard to see sterling getting that excited about the Inflation Report. The risks lie mainly with any indication or talk of easier policy, given the backdrop that we see of easier elsewhere (Japan, ECB, RBA and potentially the RBNZ and BoC).

Elsewhere, the Brazilian Real continues to pin hopes on the imminent impeachment of President Rousseff, with this seen paving the way for an improved outlook for the economy and finances. Most EM currencies have fallen so far this month and the Real’s performance has stood for most of the year. The question is whether this can continue once the euphoria settles from the current political theatre. From many angles, this looks unlikely.

Publication source
FxPro information  FxPro reviews

December 2, 2016
It's not the jobs numbers
It’s not bee the economy that has been driving the dollar over the past 3 weeks, of that we can be pretty sure. Rather, it’s been expectations of tax cuts and spending increases, together with incentives for dollar repatriation under the new President...
December 2, 2016
OPEC alliance stuck a global agreement
The Oil prices jumped on Wednesday after the organisation members agreed to pare production first time since 2008, to reduce global oversupply, which made the prices collapse by half since mid-2014...
December 2, 2016
Rebound continues in UK construction
The latest data on the UK construction sector was released this morning, and will likely be seen as positive overall as the recovery from the Brexit shock appears to be persisting. Despite this the FTSE 100 is under pressure this morning...

Grand Capital Rating
HYCM Rating
FxPro Rating
XM Rating
Orbex Rating
 FXTM Rating

OptionFair Rating
Anyoption Rating
OptionBit Rating
Banc De Binary Rating
TropicalTrade Rating
Grand Option Rating