Archived IMT (2011.04.07)

Bank of England Preview:

The OIS market is pricing in just an 8% chance of a BOE rate hike

Thurs while all 32 economists surveyed by Bloomberg expect no change. The decision is at 7:00 EST, 11:00 GMT, 12:00 BST. Remember there is no statement when there hasnt been a change in policy. Beware though that the BOE is the most unpredictable G7 central bank and GBP pricing probably reflects a higher probability than 8%. A similar story unfolded in the past three BOE decisions and the pound has weakened following announcements that the Bank Rate would stay at 0.50%. On Wed., NIESR estimated growth of 0.7% in Q1 (not annualized) after a 0.5% decline in Q42010. That puts average growth at 0.1% over the past six months not enough to hike rates. At the March 10 BOE meeting Governors WEALE, DALE, arch-hawk SENTANCE voted for hikes. The dissenters will need two more votes. Governor King and top Deputies BEAN and TUCKER wont change course and POSEN is the most dovish member. Risks come from FISHER and MILES but neither has made any indication he will vote for a hike. No change may see

cable weaken off 25-40 pips while a hike would send the pair soaring. Accordingly, GBP weakness resulting from no rate hike is most likely to be played out against EUR, as the cross retests 0.8810 until facing the key 0.8850s.

By AB - AshrafLaidi.com Staff