GBP: A Dovish Twist From BoE; EUR/GBP Set To Gain Further – Danske

Danske Bank Research still views the core of the BoE Monetary Policy Committee (including governor Mark Carney) as being tilted to the dovish side after today’s 6-2 vote to keep the rate unchanged.

“We still expect the BoE to remain on hold until the Brexit negotiations are concluded in Spring 2019. The main reasons are that we think the BOE is still too optimistic on both wage growth and GDP growth and political uncertainty remains high due to Brexit.

EUR/GBP rose sharply and broke above 0.90 on the announcement, as expected given the dovish twist from BoE. The market now implicitly indicates around 35% probability (8.5bp priced) of a November rate hike compared to 9.5bp priced prior to the BoE announcement.

Over the coming 1-3 months, we expect EUR/GBP to test higher levels on the back of a strong EUR and BoE repricing,” Danske argues.

Source: Danske Bank Research

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