BoE: between the start of a hiking cycle and a ‘one-off’ raise – Danske Bank

Arne Rasmussen, Head of FI Research at Danske Bank, assessed today’s BoE event and prospects for the Sterling.

Key Quotes

“With a Bank of England (BoE) rate hike almost fully priced in (approximately 23bp is currently priced), the big uncertainty relating to the BoE meeting today is whether the BoE is about to enter a prolonged hiking cycle or whether the rate hike in November will be a one-off adjustment taking back the ‘emergency cut’ it delivered in August 2016 (following the Brexit vote)”.

“Given the still relatively subdued outlook for the UK economy in coming quarters and given that Brexit uncertainty is expected to prevail, we expect the BoE to remain on hold for 12 months after the hike today”.

“Overall, we still expect EUR/GBP to trade within the 0.8650 -0.90 range in coming months with relative rates, growth and Brexit uncertainty likely to be EUR/GBP positive in the coming months, and yesterday, we recommended buying EUR/GBP for move toward 0.90”.