Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Article / 04 August 2016 at 8:00 GMT

Letter from Paris: 'The only central bank meeting that counts'

Head of Editorial Content / Saxo Bank
  • BoE outing central to August policy landscape
  • Poor PMI data signal risk of UK recession
  • September to feature over 30 central bank meetings

By Michael McKenna

Calling today's Bank of England outing "the only central bank meeting that counts this month," Saxo Banque reports that it sees expectations of a 25 basis point rate cut as credible given the data available to the bank.

Among the main precursors to today's forecasted cut were the PMI data released yesterday, which showed the services sector reading decline from 52.3 in June to 47.4 in July; the lined construction PMI release slid from 46 in June to 45. last month.

"The data confirm that there is a high risk of a 2009-like recession in the UK," reports Saxo Banque from Paris, adding that "some action is needed to reassure investors."

While the consensus expectations of a hike are strong, and likely already priced into the major GBP pairs, any surprise – or even no surprise at all, but merely confirmation of the market's data-driven fears – could see a major move in sterling.

Yesterday, Saxo technical analyst Kim Cramer Larsson said that he could see extremes of 1.28 to 1.3650 depending on the BoE's statement.

"While there has been no credit tightening or market panic," says Saxo Banque, "a BoE rate cut is only a matter of time."

After today's outing, concludes Saxo Bank's French headquarters, the remainder of August will likely be fairly quiet on the policy front, as the month is largely free of major central bank releases after today.

In September, however, over 30 central bank meetings will give birdwatchers all of the opportunities for hawk and dove (probably more of these) viewing that one could ever desire.

Hawks over the Fed?
Perhaps over Washington? Photo: iStock

Michael McKenna is an editor at


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