Back
18 Mar 2015
BoE and political uncertainty to weigh on GBP – RBS
FXStreet (Barcelona) - FX Strategists at RBS, note that the pound may remain under pressure if wage inflation slows down, particularly against the dollar, while political uncertainty will also keep the GBP soft.
Key Quotes
“The Bank of England has surprised on the hawkish side both in their recent commentary and in their February Inflation Report, where it forecast that inflation would rise above target over the forecast horizon based on market pricing of the expected path of the Bank Rate. We ultimately believe that price inflation will underwhelm the Bank’s expectations, and Governor Carney’s comments on the potential dampening impact of the currency on inflation last week is perhaps an early sign that the BoE is becoming more concerned about the path of inflation.”
“Still, the recent pickup in wage inflation has been a key motivating factor behind the relatively hawkish stance of the BoE (which we expect will be reflected in the BoE minutes) and a slowdown in wage inflation could keep the GBP under pressure, particularly vs. the USD.”
“The UK Government also presents its 2015 Budget ahead of May elections. BoE monetary policy and political uncertainty may not mutually exclusive and political uncertainty could weigh on GBP.”
Key Quotes
“The Bank of England has surprised on the hawkish side both in their recent commentary and in their February Inflation Report, where it forecast that inflation would rise above target over the forecast horizon based on market pricing of the expected path of the Bank Rate. We ultimately believe that price inflation will underwhelm the Bank’s expectations, and Governor Carney’s comments on the potential dampening impact of the currency on inflation last week is perhaps an early sign that the BoE is becoming more concerned about the path of inflation.”
“Still, the recent pickup in wage inflation has been a key motivating factor behind the relatively hawkish stance of the BoE (which we expect will be reflected in the BoE minutes) and a slowdown in wage inflation could keep the GBP under pressure, particularly vs. the USD.”
“The UK Government also presents its 2015 Budget ahead of May elections. BoE monetary policy and political uncertainty may not mutually exclusive and political uncertainty could weigh on GBP.”