Weekly Outlook for Gbp

Weekly Outlook for Gbp


Quotes from Barclays Capital:
-The focus of the week will be the Inflation Report. We expect a dovish report with the MPC forecasting inflation below target in 2 years - a forecast which the market typically interprets as a signal of more loosening to come. However, with the market already pricing in a 25bp cut as early as September and with a recent Reuters poll suggesting that 60% of forecasters are expecting more QE, the downside for GBP from this message will be limited.
-Aside from the content of the report, Mervyn King's delivery will also be important. Given the recent expansion of the asset purchase programme (APP) and the on-going risks in the global economy we expect his presentation to be dovish. This will enhance the dovish thrust of the report and increase the weight on GBP.
-We note that EURGBP and GBPJPY have historically had the strongest response to moves in 10y interest rate differentials. UK IP and manufacturing production will also be important for GBP as they provide more colour on the performance of the UK economy in Q2.


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