BoE decision crucial for GBP/USD – Rabobank

By FXstreet.com | Updated July 30, 2014 AAA

FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained that the dollar aside, the discussion over when the BoE will announce its first rate hike of the cycle is crucial for the outlook for cable.

Key Quotes:

“The strength of the UK economic recovery coupled with the likelihood that September’s revisions from the ONS will shallow out the recession that has been experienced in the UK in recent years all argue for a sooner rather than later move”.

“However, UK CPI inflation at just 1.5% y/y is well below the Bank’s 2.0% target. On top of that earnings data is surprisingly weak and suggests that there may still be a fair degree of slack in the UK labour market. With this in mind we have chosen to hold out forecast for the first BoE rate hike at May 20155; at least for the time being”.

“Although we now find ourselves a little less hawkish than the market consensus, we maintain our expectation that sterling will remain well supported going forward and see scope for cable to hold the 1.72 area until early next year”.

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