GBP: Carney testimony, key UK data to support BoE hiking sentiment - ING

After a few weeks of highly charged political focus in the UK, analysts at ING expect the narrative for GBP to slowly shift towards the November 'Super Thursday' BoE meeting.

Key Quotes

“This week's UK data releases - including the CPI report (Tue), job market report (Wed) and retail sales (Thu) - are unlikely to derail sentiment for a 25bp Bank rate increase next month. While that's all but in the price of the pound, we prefer to focus on how robust underlying UK inflationary pressures are - and whether any upside surprises prompt the Bank to signal the start of a 'more than a withdrawal of stimulus' hiking cycle next month. On that note, Governor Carney testifies to UK lawmakers this week (Tue) - along with new MPC members Ramsden and Tenreyro. Any hawkish signals could steepen the UK rate curve and we think GBP/USD at 1.35 is a strong possibility around the Nov BoE meeting.”

“GBP’s whipsaw price action last week is indicative of the currency’s somewhat inexplicable sensitivity to Brexit-related headlines. Deadlock talks, contingency planning around a 'no deal' scenario and talk of a transition deal shouldn't be new news and we think short-term - as well as broader - political risks are fairly priced into GBP for now. Therefore we expect to see little fallout in GBP when EU leaders this week conclude that there has been little progress in talks thus far. It is a Brexit transition deal matters more for GBP sentiment and PM May's 'emergency' meeting with the EU on Monday might push the agenda towards tranisition talks.”