FXStreet (Edinburgh) – Jane Foley, Senior Currency Strategist at Rabobank, sees the Bank of England hiking in May 2016 and the cross to slip to lower levels.
Key Quotes
“The money market is currently fully priced for a Bank of England rate hike by next May”.
“Just a few weeks ago steady rates until summer 2016 were anticipated by the market”.
“The release of April weekly earnings data reported a better than expected 2.7% 3m y-o-y rise. This was the strongest increase since early 2009 and tallies with an IDS survey which suggested that despite pay freezes in some industries that almost 90% of Q1 UK pay awards were in the region of 2 to 3.99%”.
“Higher wage deals have led to MPC member Weale suggesting that he could be prepared to vote for a BoE rate hike as soon as August”.
“That said, weak productively growth in the UK should cap wage rises and we expect that another austerity budget in July, coupled with EU membership concerns, will keep rates steady until next May”.
“While we expect that these factors will lead to GBP losing ground against the USD during H2, we continue to anticipate that EUR/GBP will edge lower in the coming months under the weigh of the ECB’s asset purchase programme”.
(Market News Provided by FXstreet)