There is a very real risk that the BoE MPC will follow last Thursday's unexpected 25bp base rate hike to 5.25% with another 25bp increase as early as next month (Feb 8). This risk derives from the 09:30GMT disclosure that annualized UK CPI rose to an above-forecast 3.0% in December, from 2.7% in November, and 2.4% in October.
The BoE's target level is 2.0%. Cable scaled a new 13-day peak of 1.9705 in a knee-jerk reaction to the UK inflation data. A bout of profit-taking on long GBP positions was then blamed for a three-quarter cent drop to lows pre-1.9625 (today's Asia low). At 12:00GMT, Andrew Sentance is due to deliver his first-ever speech since joining the BoE MPC last Autumn.
The title of the speech is "Current Issues in UK Monetary Policy". Tim Besley makes his inaugural MPC speech on Thursday. Pre-UK CPI: a US investment house recommended the instigation of long EUR/GBP positions circa 0.6585, targeting 0.6700, with a stop set below 0.6545. January's Empire State manufacturing index will be revealed at 13:30GMT. Forecast: 19.3, from 23.1 in December.
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