The UK will receive an update on the health of its manufacturing sector post-Brexit next week, with the manufacturing PMI to be released Monday and production data to be released Friday.
So far, data have suggested that various worst-case scenarios in the
aftermath of the referendum have not materialised. However, MPC members
have signalled that they continue to expect a need for further easing
later this year, and our economics team expects data to paint a picture of an economy that has effectively stalled.
We view the GBP as still vulnerable, and expect GBPUSD to hold below 1.30 despite broader USD weakness.
Market expectations for Bank of England easing continue to look too
conservative in our view, with 5bp of rates cuts priced for the November
meeting versus our economists’ expectations for a 15bp cut.