Sterling could rebound after BOE’s QIR

9 February 2015, 10:41
Andrius Kulvinskas
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 The Investec Team explains that Sterling might see a rebound post BOE’s QIR as the market brings forward the expected normalisation path by the MPC, with inflation likely to be seen rising towards 2% target over the medium-term.

Key Quotes

“In the UK, the Bank of England’s Inflation Report on Thursday will likely be the most keenly awaited event, as market watchers wait to hear if Governor Carney has put rate hike plans onto the back burner amidst the possibility of negative CPI inflation numbers in the UK in H1 2015.”

“Whilst the soggy prices patch could leave the Monetary Policy Committee in wait and see mode through the summer, any normalisation plans will not have been shelved completely with inflation projections still likely to be seen rising towards the 2% target over the medium-term.”

“Given the bond market has pushed expectations for a first rate rise out to later 2016 (partly due to safe haven flows) there is the potential for a Sterling rebound as the market brings forward the expected normalisation path if the BOE still see prices rebounding to target in their time horizons.”
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