(02 August 2018)DAILY MARKET BRIEF 1:Pound shrugs off Bank of England

An interest-hike of 0.25% expected later today from the Bank of England is already priced in. Unchanged at 0.50% since 2 November 2017, the hike is being pushed by hawks in majority in the Bank’s Monetary Policy Committee. The UK economy remains in shape, private consumption is in line with its 2-year average, unemployment is at a record low while net hourly earnings are slightly above inflation. The British economy will be able to cope with the rise, as June inflation stabilised at 2.40%.

In the event of a no-go, sterling would plummet; a move the BoE would avoid at all costs. Uncertainties surrounding Brexit already are headwind factors. After failing to find an agreement with EU Commission negotiator Michel Barnier last Thursday on customs union, Prime Minister Theresa May is looking for support for her Brexit plan, meeting French President Macron tomorrow. USD/GBP is weakening, trading at 1.3079 and expected to bounce back to neutral at 1.3130 in the short-term.
We continue to see good value in long GBP trades, yet politics continue to cloud the sterling outlook. We would wait until chaos surrounding Mrs May fades, before initiating our medium-term bullish view on GBP. 

By Vincent Mivelaz