GBP: BoE is the near term focus - Westpac

Tim Riddell, Research Analyst at Westpac, explains that as expected a dull Budget did lift growth estimates, but gave little new fiscal impulse and so little support for GBP and Brexit may be the underlying driver, but, post- Budget, the BoE (16th) is the near term focus for the currency pair.

Key Quotes

“The Bill to trigger Article 50 may be delayed due to amendments from the House of Lords, but the end-March deadline should be met. As negotiations begin, the stance of EU should become clear and impact sentiment within UK.”

“BoE is likely to comment on the risks of the end of phoney Brexit turning into a material headwind for growth, despite sound performance post the vote. They should also reiterate looking through the near term rise in inflation (on the back of weaker GBP and energy costs).”

“Low labour cost pressures and poor productivity should offset CPI concerns.”

“Rising US yields continue to push spreads over gilts towards 2016 lows and will likely drive GBP/USD towards 1.20, if not 1.1850, even though broader range trading is likely to remain.”