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Previewing the Bank of England’s (BoE) policy meeting next week, TD Securities analysts said that the bank could downgrade macro forecasts and deliver an update to its thinking on negative interest rates.

Key quotes

“We think that the BoE’s conclusions are likely to conclude that while negative interest rates should be part of the toolkit, and that the lower bound for Bank Rate is now below zero, negative rates are not imminent and are unlikely to be implemented in the current economic cycle.”

“The January MPC meeting presents a binary set of risks for sterling as markets will weigh the likelihood — and timing — of a potential dip into negative rates. While not our base case, a signal these are on the near-term horizon should send the GBP sharply weaker. Beyond this, however, we think GBP’s recent phase of relative outperformance may be coming to an end as its adverse positioning and valuation factors become a more pressing concern.”