Bank of England's Brexit views in focus as rates set to stay on hold

Bank Of England view on Brexit will become clear today, after the central bank announced its first decision after raise interest rates for a decade, last month.

Market participants expect Bank Of England members to wait nearly a year before raising interest rates again. This gradual tightening of monetary policy reflects, as Brexit insecurity, so strong inflationary pressure at six-year high.

According to the European Commission, the UK has made enough progress in the Brexit talks to continue negotiating a trade deal with the EU. On the other hand, better retail data from today gave a clear picture of the positive consumer sentiment on the island. For these reasons, we expect BoE members to have a neutral tone of progress on Brexit.

The probability of raising interest rates today is almost zero, and investors will focus their attention on how the central bankers voted. Expectations for voting today are members to be unanimous and all 9 to vote in favor of maintaining interest rates at 0.50%. Given the better data from today, we can expect an increase in the number of members wishing to raise, which will lead to a GBP appreciation.

Taking into account the good economic data and the progress of the Brexit talks, we remain biased towards the pound. In the process of negotiations ahead, we expect slight barriers that would put pressure on the pound, but the upward movement will remain.

Source: Reuters

Jr Trader Petar Milanov

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