Cable to drift back towards 1.2250 on BOE - ING

The Research Team at ING published its expectations on the BOE policy outcome and its potential impact on the GBP.

Key Quotes:

“Brexit-related politics and BoE policy at risk of placing GBP in the firing line.“

“The spotlight will be on the ‘Super Thursday’ BoE meeting; with markets pricing in negligible expectations of a Bank rate cut, we think an on hold BoE is unlikely to yield much GBP upside.”

“Instead, policy clarity could prove to be GBP negative: the Bank's affirmation of a dovish outlook will dismiss recent thinking that the MPC will have to stay neutral (or even reverse previous easing) to stem GBP-induced inflationary pressures.”

“A strong dovish bias will push the front-end of GBP OIS curve lower, while also eliciting a reversal in recent steepening.”

“We prefer to fade the GBP short-covering move higher, with today’s high-court Brexit ruling unlikely to see a surprise block to the triggering of Article 50.“

“Cable to drift back towards 1.2250, but with the $ plagued by election uncertainty, EUR/GBP is our preferred vehicle to play any GBP downside today (we target 0.9150).”