Bank of America Merrill Lynch FX Strategy Research sees little chance of an August rate hike and expects a 6-2 vote to keep rates on hold at this week's Bank of England (BoE) policy meeting.
"The underlying message from the BoE will be, we think, that market pricing is fine, rates could rise if all goes well, but we are going to wait and see," BofAML adds.
FX: asymmetric for GBP.
"We think the risks are probably asymmetric for GBP heading into the meeting; a more hawkish tone to the QIR and Press conference will have a larger (positive) impact on GBP than a dovish one. For while the BoE may feel the need to push back on rate hike expectations (markets continue to price in a near-50% chance that the BoE will hike by year-end), we doubt the markets will be persuaded to price in the possibility of renewed policy easing.
We continue to expect GBP to respect its current ranges until greater clarity on the Brexit deal manifestsand retain a structurally higher vol bias," BofAML adds.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
