#EURGBP @ 0.88403 BoE Preview: Four scenarios and their implications for – TDS
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Economists at TD Securities discuss the Bank of England interest rate decision and its implications for the EUR/GBP pair.
“The MPC hikes 25 bps and signals that inflation and wage persistence means that it has likely not reached its terminal rate. Emphasis is placed on the different mandates of the FPC and MPC, leaving the MPC to focus on inflation-fighting. EUR/GBP 0.8700.”
“The MPC hikes 25 bps, and leaves its guidance largely unchanged, though the conditions for a further hike are tightened a little on the margin. After Wed’s strong inflation, the vote is likely 2/6/1 for 0/25/50. EUR/GBP 0.8900.”
“The MPC signals a BoC-style ‘conditional pause’, wherein they say that rates may not necessarily rise any further (barring large surprises in the data), and it’s time to take stock of the impact of past rate increases. The vote to hike is close (eg 5-4). EUR/GBP 0.8950.”
“The MPC does not hike rates, but signals that banking sector uncertainty was the principal cause of the pause, and that if volatility settles, it may not have reached terminal yet. The vote to hold is close (eg 5-4). EUR/GBP 0.8950.”
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