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BoE: Market implications – Nordea Markets

Andreas Wallström, Chief Analyst at Nordea Markets, suggests that the BoE inflation report indicates that roughly one annual hike is enough to keep inflation at bay as is already priced by markets for 2019 (i.e. no more hikes this year).

Key Quotes

“It is not a particularly hawkish signal, despite the unexpected uniformity in the votes.”

“The hike was broadly priced in on forehand and with a dovish wrapping the GBP reaction is muted. It doesn’t bode well for the GBP that even a unanimous hike cannot really get the momentum in Sterling going.”

“Once inflation disappoints even more (than what we have already seen), prospects of hikes will no longer be able to counter Brexit-risks. We would like to see EUR/GBP above 0.90 again, before considering a positive stance on GBP.”

“Brexit-risks will continue to rise as time works as a magnet ahead of March 2019. A relatively hawkish stance from Bank of England is likely needed for the GBP to fare decently well, in case of no news from the Brexit-front.”

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