GBP: Brexit risk continues to cloud outlook for BoE policy – MUFG

By FXStreet Lee Hardman, Currency Analyst at MUFG, suggests that the main event for the pound this week will be the latest update from the BoE tomorrow on their outlook for monetary policy.

Key Quotes

“After adjusting sharply lower early this year, the pound has at least temporarily stabilized at lower levels over the last month or so. The BoE’s policy update tomorrow poses some modest downside risk for the pound but is unlikely to trigger a further sharp sell-off.

The BoE are likely to acknowledge that the UK economy is slowing more than expected ahead of the upcoming EU referendum. Markit noted recently that their PMI surveys for April were consistent with flat growth in Q2 adding to building evidence that heightened uncertainty ahead of the referendum is beginning to have more of a negative impact on growth. It has triggered some speculation that it could prompt more dovish MPC members Haldane and/or Vlieghe to vote for a rate cut as soon as at tomorrow’s policy meeting.

However, it remains more likely that the BoE will refrain from deciding to vote for any significant change in policy until there is greater clarity over the outlook for growth and inflation which will not occur …read more

Source:: FX Street