UK inflation concerns change one MPC members' mind on cutting interest rates..
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| UK inflation is expected to touch 4% this year, an upgrade of 0.5% from the previous BoE meeting with Trump tariffs primarily to blame for the uplift. A vote to keep interest rates unchanged at 4.5% was voted 8-1 this round (8-2 last time).
The result, vote change and inflation prediction has all contributed to a slightly stronger Pound (higher the interest rate, the stronger the currency). With no vote again until May 8th, Sterling should be well positioned to perform at current levels (all being equal).
The chances that the central bank skips a cut in May have risen and now money markets (not a very good forecaster to be honest) predict only 50bp being cut for the rest of the year. With this in mind, strong boundaries look set for the time being on £-€ with 1.18-1.20 mid-market levels priced in near-term.
Elsewhere, Rabobank (one of Europe's largest commercial banks) has lifted its Euro forecast after Germany's "whatever it takes" moment. It has abandoned its parity call for EUR-USD (most economists have now done the same) with a vastly different 1.12 and has lowered its 1.23 call on GBP-EUR down to 1.20 by year-end.
Friday forecast unveiling for Q1 | Every Friday in the last month of a quarter, we will publish the forecasts of 5 top investment banks (that are trading the highest volume of currency) and myself on where we all expect to see GBP v EUR to finish that quarter.
These opinions are gathered generally 2-weeks before a new quarter starts and are shared with any of our customers and prospective customers that request them. They offer facts from the past and research on what to expect in the future to give customers an idea on what could happen in the months ahead.
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HSBC - £-€1.25 Barclays Bank - £-€1.22 Danske Bank - £-€1.22 ME (Dan Waterman) - £-€1.18 JP Morgan - £-€1.15 ING Bank - £-€1.14
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