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BoE MPC minutes in the limelight - BTMU

FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, underlines the significance of the MPC minutes ahead in the week.

Key Quotes

"release of latest MPC minutes in focus after less hawkish QIR The pound is likely to continue to trade on a weaker footing in the near-term following the release last week of the BoE’s Quarterly Inflation Report unless there is hawkish surprise in the latest MPC minutes which are released on Wednesday. The Quarterly Inflation Report prompted investors to push back expectations for the first BoE rate hike into the first half of next year. The BoE concluded in their QIR that a larger than expected positive labour supply shock is helping to dampen upside risks to inflation from the faster than expected erosion of spare capacity in the UK economy and is expected to continue to do so in the coming years allowing the BoE more scope to maintain looser monetary policy for longer."

"In an interview with the Sunday Times over the weekend, BoE Governor Carney reiterated the main message from the QIR but added of note that “ we have to have the confidence that real wages are going to be growing sustainably [before rates go up]. We don’t have to wait for the fact of that turn to do so”, which at the margin will be interpreted as less dovish."

"In addition Governor Carney also hinted that the time for a split MPC vote was nearing by stating that while the Committee is united that rate increases will be limited and gradual, “people might have different views on the exact timing”. It will keep alive investor expectations that the latest MPC minutes maybe interpreted as more hawkish than the QIR and could also include a first dissenting vote in favour of a rate hike."

"Incoming economic data from the UK has in general disappointed so far in Q3 which is also weighing on the pound in the near-term. The release overnight of the latest Rightmove house price survey for August provided further evidence that the UK housing market is losing upward momentum."

"The survey revealed that house prices have declined by more than expected during the summer months. Sellers in London have lowered their prices by the largest monthly percentage in more than seven years. It will help to ease concerns at the BoE that the housing market is overheating."

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