Our economics team is forecasting a 25bp cut in the bank rate and a resumption of QE – forecasting 75bn in purchases over the next 4-months. Forecasts for inflation and growth will be reduced.
The risk to sterling is two-fold:
Given the market expectations have been building for weeks, the bar for the BOE to deliver will be fairly high leaving an upside surprise difficult.
Still, we remain bearish on GBP. A resumption to rate cuts and asset purchases would be a long-run signal for Real Money accounts that have been slow to rebalance their asset holdings.
From that angle we see room for some GBP selling into and after the event.
Copyright © 2016 CitiFX, eFXnews™Original Article
