BoE: Markets adjusted to a wait-and-see stance - ING

The latest round of key UK economic data has put talks of a BoE rate hike on the back burner, with the breakdown of 2Q GDP highlighting the current weakness of the UK consumer, according to analysts at ING.

Key Quotes

“Markets have now adjusted to a wait-and-see BoE policy stance and see limited risks of a flatter UK rate curve. For short-term domestic rates to move lower, we would need to see evidence of weak consumer activity turning into a hard-landing for the UK economy. Our economists see this as highly unlikely and are not expecting the economy to take a significant turn for the worst.”

“We also believe EUR/GBP parity may not be in the economic interests of the BoE given the implications that further GBP weakness has for imported inflation and the squeeze in real household incomes story. Equally, one could argue it is not in the economic interests of the ECB for financial markets to get ahead of themselves when it comes to pricing in the end of the central bank's quantitative easing programme. With implicit opposition from both sides, it's difficult to fundamentally justify any EUR/GBP move towards parity - certainly over the next three to six months.”