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European update – BoE to spring surprise?

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Mixed start after Fed opts for patience

Another mixed start to trading in Europe on Thursday, while US futures are pushing little higher, partially offsetting Wall Street’s decline on Wednesday.

Source – Thomson Reuters Eikon

Clearly investors did not take too kindly to the Fed refusing to bow to public – and more importantly political – pressure to at least signal a willingness to be more accommodative. The central bank has already dramatically softened its monetary policy position, having signaled no rate hikes this year and only one next and policy makers clearly believe this is sufficient to deal with the challenges the economy is facing. Clearly the data supports this view.

BoE to offer hawkish surprise?

The Bank of England is up next and the widely held belief appears to be that it’s going to fall in line with its peers and do nothing. While I don’t expect a rate hike today, I do question the logic behind just waiting for Brexit to be resolved. It made sense from August last year but what if the can is kicked down the road again, are we set for an indefinite pause?

Given the data, I wouldn’t be surprised if the BoE retains a hawkish stance and maybe even suggests there could be a hike later in the year once everything has settled down. Brexit has already delayed the tightening cycle considerably, I don’t think it will want this to continue

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Former Craig

Former Craig

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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