OctaFX | OctaFX Forex Broker
Open trading account

BoE: Cut on 30th January looks a distinct possibility – RBS

Analysts at The Royal Bank of Scotland (RBS) offered a brief preview of the upcoming Bank of England monetary policy meeting and explained the rationale behind market expectations for an interest rate cut.

Key Quotes:

“A sharpish fall of 0.3% on the month means UK GDP is close to a standstill on the more usually presented quarterly basis. Total output grew by 0.1% in the three months to November 2019. The picture is a decent likeness to that initially sketched by the business surveys, with services lacklustre but just about growing (+0.1%), while production, pounded by both global and local winds, shrinking by 0.6%. We’re also well placed for a final year-end showdown. If December flatlines, then GDP will fall in Q4, the 2nd quarterly fall in three, finger pinchingly close to a recession.”

“Consumers were the main contributors to UK economic growth last year, so December’s slump in retail sales is especially disappointing. The quantity bought in December was 0.6% lower than November, which itself was pretty weak. Sales in Q4 as a whole were down 1% on Q3, and we’ve now had 5 months without any growth. Only when you start making comparisons to 2018 does the picture get a little better, showing growth of 1.6%. Even the pace of growth online has cooled, but still managed to break the £2bn a week mark for the first time.”

“Inflationary pressures eased unexpectedly in December with the UK’s CPI slipping to a three-year low of 1.3% y/y. The drop was driven by services, falling from 2.5% y/y in November to 2.1% y/y. This marked a 20-month low. On the other hand, consumer goods inflation stabilised at 0.6% y/y, although petrol prices are on the rise again. The fact that services inflation is easing suggests the economy is slowing. The BoE’s MPC are sharpening their interest rate cutting spears. A cut on 30th January looks a distinct possibility. Financial markets certainly think so.”

EUR/GBP trims gains and re-focuses on 0.8530

The now better tone in the British pound is forcing EUR/GBP to leave behind initial gains and recede to the 0.8530/25 band. EUR/GBP remains sidelined
Read more Previous

USD/JPY New York Price Forecast: Greenback holding above the 110.05 support level vs. yen

USD/JPY is in consolidation mode after the January spike above the 110.00 handle and the main simple moving averages (SMAs). The spot is hovering near its high
Read more Next
Start livechat