Archived IMT (2010.02.04)

The upcoming BoE decision (12:00 GMT) is expected leave rates unchanged at 0.5%, but the announcement regarding quantitative easing could be a more complex. The probability of renewing QE (which was concluded last week) at this months meeting is under 20%. Inflation is clearly surpassing the BoEs 2% target but slowing bank lending reflects sluggish capital formation despite the 200 bln in asset purchases. Watch out for a statement on whether the Monetary Policy Committee leaves the door open for future QE easing, in which case broad GBP losses may ensue. Yes, inflation is above target, but thats what the BoE warned to be a short-term phenomenon 2 months ago. Dont expect GBPUSD to reverse its downtrend (capped at 1.6050) before Fridays jobs report. Post-BoE risks remain slated to the downside, $1.5820 in focus.