BoE easing on the way & Brexit cabinet takes shape - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the pound has been more volatile this week reflecting recent positive political developments in the UK which are being offset by expectations of further BoE monetary easing today.

Key Quotes

“The quick appointment of Theresa May as Prime Minister has helped ease political uncertainty in the UK. PM May has moved quickly to appoint a new cabinet as well. David Davis a long standing Eurosceptic has been appointed in the key role as secretary of state for exiting the EU.

Earlier this week he set out his views on what Britain’s negotiation with the EU should look like in an essay for the website ConservativeHome. He advocated an “export-led growth strategy” and suggested that the “ideal outcome” was “continued tariff-free access” to the single market.  He expects “once European nations realise that we are not going to budge on control of our borders, they will want to talk in their own interest”. He also stated that he would like Article 50 triggered “before or by the beginning of next year”.

Further evidence of the negative shock to the UK economy from the Brexit vote which justifies looser BoE monetary policy was provided overnight by the latest RICS survey. It revealed that the UK housing market is set to slow sharply as price and sales expectations plunged which could amplify the slowdown in the UK economy.”