The pound has been able to recover from the lows despite downbeat data and rising chances of a rate cut. What’s next?
Here is their view, courtesy of eFXdata:
Citi highlights the importance of the UK PMI reports on Jan-24 for the BoE policy decision on Jan-30.
“In BoE Governor Carney’s speech last week, he explicitly states – “In the coming weeks, the MPC will watch closely surveys of business and consumer confidence (including intelligence from our Agents) as well as global developments.” And overnight, further dovish comments from BoE’s Saunders (the 4th MPC member to do so), point to a likely sluggish UK economy leading to a longer period of subdued growth that in turn would warrant a “relatively prompt and aggressive response”,” Citi notes.
“This makes the upcoming UK PMI reports crucial for the January 30 meeting though Citi analysts argue that an improvement in the composite flash PMI for January to 52.0 or above would likely see the Bank hold rates unchanged, while a further deterioration from December would likely see the Bank cut 25bp at the January 30th meeting,” Citi adds.
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