FXStreet (Delhi) – Yann Quelenn, Market Analyst at Swissquote, suggests that the Bank of England is not expected to taper with its rates today as policymakers are not only considering domestic conditions but also global conditions. Markets are currently driven by the next U.S. Fed rate hike, China’s current turmoil and lingering low oil prices.
Key Quotes
“At the last BoE meeting one member voted “yes” for a rate hike, however, we think there is no reason for others members, at least for the time being, to vote favourably.”
“Nonetheless, UK domestic conditions seem supportive of a rate hike. Only inflation remains of concern, which printed at 0.1% y/y in August. On the other side, retail sales currently stand at 4.2% y/y despite a minor setback in August. GDP is also on its way up with a read of 0.7% for Q2.”
“What’s really weighing on the minds of BoE members is that global growth and productivity remain low. The WTI is holding below $50 a barrel on fears of China’s slowdown and on the current OPEC oversupply.”
“Therefore we think the BoE will sit tight and wait for more supportive domestic data before making any move. We expect the GBP to strengthen against the EUR in the medium term. However, it is likely that BoE minutes will provide some dovish comments which could provide some positive traction to the single currency.”
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