• Bank of England to take wait-and-see approach, likely to hike in August 2019 – Lloyds bank

    Source: FxWire Pro - Commentary / 21 Dec 2017 09:00:52   Eastern Standard Time

    The evolution of the Bank of England and European Central Bank monetary policy stances are likely to play a vital role in influencing the trajectory for GBP/EUR, noted Lloyds Bank in a research report. After hiking rates by 25 basis points in November, the Bank of England is expected to take a wait-and-see approach, going ahead with caution.

    The next rise in the U.K. Bank rate is expected in August 2019. But there are risks in both directions. The current and expected levels of inflation could be used to argue for tighter monetary policy. Inflation in November was 3.1 percent. The current and expected levels of inflation could be used to argue for tighter monetary policy, stated Lloyds Bank.

    The BoE’s own economic forecasts have inflation above target over the forecast period. During the same time, the growth environment might be aided by keeping policy at these loose levels. Some activity indicators imply that the fourth quarter economic growth might be a bit weaker than the third quarter growth, and the health of the U.K. consumer is being carefully monitored.

    Markets are not fully ‘pricing in’ a hike in interest rate until the first quarter of 2019. Uncertainty clouds the outlook of the Bank Rate. Meanwhile, the ECB has already announced its plan to reduce the size of its monthly asset purchase program to EUR 30 billion until September.

    “Beyond there, we expect quantitative easing to be concluded by the end of the year and the first 10bp increase in interest rates in Q2 2019”, added Lloyds Bank.

    At 13:00 GMT the FxWirePro's Hourly Strength Index of British Pound was bearish at -81.4892, while the FxWirePro's Hourly Strength Index of Euro was bullish at 89.349. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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