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6 Feb 2015
BoE might refrain from raising rates until 2016 – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, views that BoE might keep rates on hold until February 2016, and the divergence in policies between the ECB and BoE might cause EUR/GBP to move lower towards 0.73 levels by later this year.
Key Quotes
“Even though the UK economy is managing to grow, there are still headwinds. As reflecting in this morning’s release of December trade data, weak levels of activity in the Eurozone are impacting the UK’s external sector. Also, austerity will continue post the May election.”
“However, labour market conditions are continuing to tighten and the BoE is still likely to be one of the first developed world central banks to hike interest rates this cycle.”
“Through much of last year, the value of the pound was heavily influenced by speculation regarding the timing of the first BoE interest rate hike of the cycle. The dovish November Inflation Report pushed back these expectations aggressively.”
“The market is currently not fully priced for the first hike until late spring 2016. We do not expect the BoE to act until February 2016. This movement in expectations placed downside pressure on the pound into the end of last year, but they now appear to have moved far enough”
“Even if the BoE delay a rise in rates until February 2016, it is likely that the ECB will still be purchasing assets at this time as part of its QE plan.”
“In view of the divergent outlook for BoE and ECB policies next year we expect EUR/GBP to reach push down towards 0.73 later this year and to fall further in 2016.”
“We see risk of cable consolidating above the 1.50 level.”
Key Quotes
“Even though the UK economy is managing to grow, there are still headwinds. As reflecting in this morning’s release of December trade data, weak levels of activity in the Eurozone are impacting the UK’s external sector. Also, austerity will continue post the May election.”
“However, labour market conditions are continuing to tighten and the BoE is still likely to be one of the first developed world central banks to hike interest rates this cycle.”
“Through much of last year, the value of the pound was heavily influenced by speculation regarding the timing of the first BoE interest rate hike of the cycle. The dovish November Inflation Report pushed back these expectations aggressively.”
“The market is currently not fully priced for the first hike until late spring 2016. We do not expect the BoE to act until February 2016. This movement in expectations placed downside pressure on the pound into the end of last year, but they now appear to have moved far enough”
“Even if the BoE delay a rise in rates until February 2016, it is likely that the ECB will still be purchasing assets at this time as part of its QE plan.”
“In view of the divergent outlook for BoE and ECB policies next year we expect EUR/GBP to reach push down towards 0.73 later this year and to fall further in 2016.”
“We see risk of cable consolidating above the 1.50 level.”