The case for a BOE November hiking strengthens further — BTMU

Where the target is in the cable

BTMU FX Strategy Research note that the GBP has started the week on stronger, reflecting both a reduction in the political risk in the short term and the construction of expectations of monetary tightening by the BoE.

«The announcement yesterday from the ONS that it had substantially minimize unit labour costs has reinforced expectations that the BoE will start to gradually increase interest rates at the next meeting in November.

….Currently, we have penciled the first hike in November, and it seems reasonable in the current situation, to wait another one or two excursions in the year following the first hike in assuming that the UK is able to get a transitional agreement with the EU for about two years. The UK government has clearly signalled that it wants a transition agreement, but as Prime Minister, Theresa may, was reported yesterday, it is additionally extremely important to be prepared for a no deal scenario, if the EU is not ready to reciprocate.

All in all, we continue to see the scope of the book to strengthen if a transition deal is agreed, in a timely manner, in the coming year,» BTMU argues.

BTMU targets GBP/USD at 1.3560 by the end of the year and at 1.3950 by the end of Q1 2018.

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