Investment Clock insights

Change of view on Bank of England


Ian Kernohan

27 October 2016

Although our November Bank of England (BoE) rate cut call was based more on a reading of prospects for the UK economy in 2017 than it was on the Q3 GDP, it wasn’t totally insensitive. Despite the fact that early estimates of GDP are often quite inaccurate, the 0.5% quarter on quarter print will cause the BoE to pause and wait for another opportunity if the economy slows during the Brexit process, which we assume it will.  

 

Markets had priced out a move in November, and the Monetary Policy Committee (MPC) would be reluctant to spring a surprise, particularly given the recent fragility of sterling.  There isn’t really enough time to shift market expectations between now and the MPC meeting next week.  Sterling enjoyed a modest bounce on the GDP news, however prospects for the currency depend on whether it can jump back to trading on the data rather than politics, which is doubtful heading into triggering Article 50.  We expect the US Federal Reserve to hike interest rates before the end of the year, which will continue to put upward pressure on the dollar.
The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.

 

Markets had priced out a move in November, and the Monetary Policy Committee (MPC) would be reluctant to spring a surprise, particularly given the recent fragility of sterling. There isn’t really enough time to shift market expectations between now and the MPC meeting next week. Sterling enjoyed a modest bounce on the GDP news, however prospects for the currency depend on whether it can jump back to trading on the data rather than politics, which is doubtful heading into triggering Article 50. We expect the US Federal Reserve to hike interest rates before the end of the year, which will continue to put upward pressure on the dollar.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.