BoE on track to hike in August – AmpGFX

According to Greg Gibbs, Analyst at Amplifying Global FX Capital, recent comments fro the BoE Governor and lifting of near-term Brexit uncertainty has increased the probability that the bank will proceed with its second hike at their next meeting on 2 August.

Key Quotes

“In a speech at the Northern Powerhouse Summit in Newcastle, on Thursday last week, BoE Governor Carney said: “Overall, recent domestic data suggest the economy is evolving largely in line with the May Inflation Report projections, which see demand growing at rates slightly above those of supply and domestic cost pressures building.”

“Carney said recent data had given him “greater confidence” that weak first-quarter growth “was largely due to the weather”.”

“He said household spending and sentiment had “bounced back strongly”.”

“These comments and the lifting of near-term Brexit uncertainty increase the probability that the BoE will proceed with its second hike (after the first in November last year) at their next meeting on 2 August.   According to Bloomberg, based on OIS, this is 81% priced-in.”

“Carney’s speech also highlighted the dangers of trade tariffs, using Brexit as an example of how they can dampen business confidence and investment.   The BBC reported that he cited the fall in fall in the export component of the UK PMI data.”