Bank of America Merrill Lynch Research discusses its expectations for the BoE policy meeting on Thursday.
"Is a six month Brexit extension a strong enough reason for the BoE to take a hawkish stand at this week's policy meeting? We do not think so. They will inevitably sound a little less dovish, but not dramatically so we think. We expect a message of patience.
Barring a significant shift in rhetoric from the Bank of England and given the breakdown in the FX/rates correlation, we think it unlikely the May meeting will be a game changing event for GBP. For choice, and given that the UK rates market continues to price in a rate hike, the asymmetry is skewed to a weaker GBP. But in all likelihood, Brexit will continue to be the main focus for GBP," BofAML projects.
"More pertinently, the ongoing uncertainty around the Prime Minister's leadership and general election risks are probably another reason why GBP has been unable to benefit from the pricing out of the Brexit risk premium. Our medium-term view remains constructive on GBP based on valuation grounds and soft Brexit expectations. For now, there are enough positional and political cross-currents to suggest that GBP remains confined to its range around the $1.30 inflexion point," BofAML adds.