GBP likely to weaken moderately post-BoE - BNPP

Analysts at BNP Paribas, expect the Bank of England (BoE)’s Inflation Report to revise down its growth forecast from the ambitious 1.9% y/y rate currently forecast for 2017, and for the MPC to vote 6-2 to keep rates on hold.

Key Quotes

“In our view, the central bank will not want to strike too much of a dovish tone to avoid significant GBP weakness. We don’t expect the BoE to hike rates in 2017, as hikes would be inconsistent with the current weaker growth data – growth averaged just 1% annualised in the first half of the year.”  

“The net result is likely some moderate GBP weakness, in our view. As rate hikes get priced out and front-end yields fall, the GBP could weaken. This effect would be exacerbated if services PMI for July, released earlier in the day on Thursday, signals any further weakening in growth data. We also note that BNP Paribas STEER™ signals that at current levels GBPUSD already appears expensive, and remains short GBPUSD targeting 1.2971. Short GBP positions remain moderate according to BNP Paribas Positioning Analysis.