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May 02 - 02:55 PM

GBP: Expecting A Dovish Hike From The BoE On Thurs - Danske

By eFXdata  —  May 02 - 01:30 PM

Danske Research discusses its expectations for this week's BoE policy meeting on Thursday.

"In line with consensus and market pricing, we expect the Bank of England (BoE) to hike the Bank Rate by another 25bp to 1.00% but focus is definitely much more on forward guidance than the rate hike itself," Danske notes. 

"We expect the Bank of England to stick to its more dovish signals, although higher-than-projected inflation and rising inflation expectations increase the probability of the BoE turning more hawkish once again. The Bank of England sounds concerned about the growth outlook and the BoE projected a rise in the unemployment rate eventually in the February 2022 Monetary Policy Report. If we are right, however, about the BoE sticking to its dovish signals, it is likely to weigh on GBP given the hawkish market pricing. Markets are pricing in a total of 150bp for the rest of the year (so basically a 25bp rate hike at each of the remaining meetings with risks skewed towards a 50bp rate hike at one of the upcoming meetings). Our Bank of England call is two additional rate hikes (August and November) but see risks skewed towards more rate hike," Danske adds. 

Source:
Danske Research/Market Commentary

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