Good morning,

Today in the UK, the focus will shift from the opening phases of the election campaign and instead focus upon the Bank of England’s brand new Monetary Policy Report (MPR) released at midday.

In reality, the MPR is just a new title for the traditional quarterly inflation report, which is released in tandem with the voting numbers on interest rates, along with the rate decision itself. As always, the rate decision is largely priced in and barring a huge shock, the rates will stay set at 0.75% for this meeting.

The possibility for volatility is more likely to come in the speech given by the outgoing governor, Mark Carney. Never one to shy away from inserting himself into the political fray, if Carney produces some comments that allude to the state of affairs post-Brexit bill and general election, then the pound could begin to generate some decent moves as the market reacts.

If the BoE decides to stay in step with the rest of the world, chiefly the USA, the EU and Japan, by cutting rates and injecting money into the economy via quantitative easing, then the pound could lose some of its recently gained pre-election strength, as the market refocuses on the underlying fundamentals of the UK economy.

Should the Conservatives win the election and pass their Brexit bill quickly, all withdrawal-based fear could lift the millstone from round sterling’s neck in the mid-term as trade negotiations begin. Should this scenario play out, the BoE and the market will scrutinise the economic data far more closely as businesses plan their moves without fear of limited single market access. However, if the time granted in the transitional period is squandered as badly as that of the withdrawal agreement, expect Brexit-related fears to mount a comeback.

Have a great day.

Author: Joshua Haden-Jones, Senior Relationship Manager