A week ago, the BOC took the policy normalisation lead among major central banks by deciding to taper QE.
They also took a more hawkish tilt by bringing forward their rate hike projection to 2022 from 2023. The question for this week’s upcoming policy meeting for the BOE is whether the bank has enough conviction in the recovery to follow the BOC’s lead?
The recent high frequency data for the UK economy has been good enough for market participants to expect sizeable upgrades to growth, inflation and employment in the BOE’s quarterly monetary policy report.
It seems that consensus still believes that the BOE will want to tred on the side of caution and not take the BOC’s lead to reduce asset purchases or bring forward rate hike projections.
However, there are a few valid reasons why the BOE would want to move forward with reducing asset purchases such as an increasingly positive economic growth outlook, especially when considering the recent high frequency data.
The other risk factor to keep in mind for the GBP this week is the UK local elections, as well as the Scottish parliamentary elections.
We’ll go through all of that in today’s week ahead video.
Highlights of the video:
00:47 – Current Baseline
05:03 – Baseline expectations for the upcoming week
09:50 – Sentiment Shifts & Trade Plan