TD Research discusses its expectations for tomorrow's BoE policy decision.
"All else equal, our base case expectation for a rate cut should see sterling weaken against its main trading partners. The degree of follow-through potential will depend significantly, however, upon the messaging that surrounds their decision. Assuming a neutral risk environment on the day, the 25bps rate cut we expect should (unsurprisingly) send cable moderately lower," TD notes.
"If our expectation for a relatively neutral Fed outcome is confirmed, cable is likely to see initial support emerge just above the 1.2950 mark. Below this, and we think the pair could slide rather quickly toward the late-December lows around 1.2900. That, we think, should provide a fairly durable floor in the absence of further bearish catalysts. For example, we think we would need to see a significant escalation of virus concerns or a clear validation that a follow-up rate cut was in the near-term pipeline for support around 1.2825 to face a meaningful challenge," TD adds.