The Bank of England’s decision is coming up. Any hints of a pause could drag the Pound down, but at lower levels, GBP would quickly draw in fresh buying to limit the scale of decline, according to economists at MUFG Bank.
Maybe a guidance shift to hint at a pause
“We would certainly argue that a hike today is unnecessary and a close call could be reflected in further division within the MPC. We will be watching the wording on policy guidance. In February the MPC stated that ‘if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required’. The conditionality of this guidance could be flipped to signalling a pause based on the condition that inflation pressures subside as the BoE expected.
“A signal of a pause at this juncture would see rates lower and take GBP lower too although we suspect at lower levels GBP would quickly draw in fresh buying to limit the scale of decline.”
“Any decline for GBP is likely a good buying opportunity.”
See – BoE Preview: Forecasts from eight major banks, final 25 bps hike
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