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12 Nov 2014
The Bank of England’s Most Moribund Inflation Report – TD Securities
FXStreet (Barcelona) - Analysts at TD Securities comment on dovish reaction post BoE’s Inflation Report.
Key Quotes
“Looking at the market reaction since the QIR was released, we’ve seen the first BoE rate hike pushed back from around September 2015 earlier today to closer to year-end now, and EURGBP rallied up to its 50dma at 0.7885, while GBPUSD slid a full big figure lower and is currently consolidating around 1.5830 .It’s difficult to argue with the move given the dovish tone of the QIR, and it’s going to take a consistent string of stronger data in order to push sentiment back the other way again.”
“This morning’s wage data was a good start, even if the boost in wages was driven by an increase in financial sector base salaries due to EU bonus regulations, as we still saw modest but broad-based increases across other sectors.”
“Our own forecasts also show CPI picking up faster than the BoE is looking for in 2015 (due partly to different assumptions on crude oil prices), but not likely fast enough to keep rate hikes in play for a few more quarters still. And with CPI only heading lower from here, and perhaps edging below 1.0% sometime over the next six months, it’s probably going to be a while before markets start thinking seriously about near-term BoE rate hikes again. For now all the focus will be on the spectre that is haunting Europe, and the downward pressure on inflation here in the UK."
Key Quotes
“Looking at the market reaction since the QIR was released, we’ve seen the first BoE rate hike pushed back from around September 2015 earlier today to closer to year-end now, and EURGBP rallied up to its 50dma at 0.7885, while GBPUSD slid a full big figure lower and is currently consolidating around 1.5830 .It’s difficult to argue with the move given the dovish tone of the QIR, and it’s going to take a consistent string of stronger data in order to push sentiment back the other way again.”
“This morning’s wage data was a good start, even if the boost in wages was driven by an increase in financial sector base salaries due to EU bonus regulations, as we still saw modest but broad-based increases across other sectors.”
“Our own forecasts also show CPI picking up faster than the BoE is looking for in 2015 (due partly to different assumptions on crude oil prices), but not likely fast enough to keep rate hikes in play for a few more quarters still. And with CPI only heading lower from here, and perhaps edging below 1.0% sometime over the next six months, it’s probably going to be a while before markets start thinking seriously about near-term BoE rate hikes again. For now all the focus will be on the spectre that is haunting Europe, and the downward pressure on inflation here in the UK."