Despite market reaction we stick with the BoE and Norges Bank views – BNP

FXStreet (Delhi) – Economists at BNP Paribas, disagree with the overly dovish interpretation of the Bank of England’s Inflation Report, pointing out that the inflation and wage growth forecasts are not substantially lower than they were in August and that the MPC has allowed itself more time to reach the inflation target.

Key Quotes

“Furthermore Governor Carney suggested that it was “reasonably prudent” to expect a rate hike in 2016, which should at least prevent market expectations from slipping back into 2017. Our expectation for a May BoE policy lift-off remains intact.”

“We also continue to expect Norges Bank to cut by 25bp in December despite markets seeing this week’s policy announcement as leaning hawkish. Our long GBPNOK trade recommendation established earlier this week has suffered a setback after the BoE and Norges Bank announcements but since our rates call for both central banks remains intact we are sticking with the trade (stop loss at 12.9415).”

“At the same time we took profit on our short EURGBP trade recommendation at 0.7145 (initiated at 0.7395). We are watching comments from ECB’s Praet who has been among those more consistently signalling scope for further easing.”

Economists at BNP Paribas, disagree with the overly dovish interpretation of the Bank of England’s Inflation Report, pointing out that the inflation and wage growth forecasts are not substantially lower than they were in August and that the MPC has allowed itself more time to reach the inflation target.

(Market News Provided by FXstreet)