Our economists expect the Bank of England’s MPC to vote 8-1 in favour of no change in interest rates. Markets will probably be looking for some potential reaction to the weaker US employment data in the minutes but we see the as BoE unlikely to alter its base-case scenario just one month ahead of the next Inflation Report. At the same time, we think a weaker Sterling may have made the Bank more relaxed about imported deflation. The bottom line is that the BoE’s message is highly unlikely to validate market pricing for no hike until late in 2016, which is why we continue to see GBP risks as heavily biased to the upside, especially given the slightly net-short GBP positioning in the FX market (see here). We remain short EURGBP from 0.7395 in our recommendations portfolio with a 0.70 target.
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