On Thursday, markets are expected to hear from opposite sides of the Bank of England’s Monetary Policy Committee spectrum, with Katherine Mann (hawks) and Swati Dhingra (doves) scheduled to speak, notes ING FX analyst Francesco Pisol.
EUR/GBP is scheduled to trade at 0.88 at the end of the year
“Yesterday’s UK CPI report was not very notable, with hawks likely pointing to a rebound in food inflation and doves to a multi-month moderation in services inflation. But as Hugh Bell said earlier this week, the December decision hangs in the balance. Doves need one defection to go ahead with the cut: we think next week’s constrained UK budget and upcoming data will suffice.”
“Sterling is trading at a moderate risk premium that looks likely to remain in place until the Budget announcement on November 26, as the government’s backtracking on an income tax rise adds a layer of uncertainty and unnerves bond investors.”
“Our end-of-year target remains at 0.88 for EUR/GBP, as the risk premium may decline post-Budget, but we expect some of it to be replaced by cautious repricing.”
