What the Banks are thinking:

-BAML: expects BoE to cut the Bank Rate by 40bp on Thursday; MPC could split the cut over July & August meetings; a rate cut should come as no surprise; would use any sterling bounce as an opportunity to sell; even a more conservative 25bp cut could not provide any relief for GBP

-Barx: expects MPC to maintain Bank Rate at 0.5% in July to allow MPC members time to scrutinise the post-Brexit economic climate; do expect dovish leaning MPC members to vote for an immediate cut; expect a 50bp cut at the August meeting allowing a full explanation to be delivered in the accompanying QIR-BNP Paribas: expect a 25bp cut and the launch of an easing cycle on Thursday; BoE also likely to leave the door open for more easing later; rate cuts and decreased FDI flows are likely to provide more downside pressure on GBPUSD

-Citi: expect a 25bp cut but no QE for now; the MPC have a range of easing options but many are compromised by the adverse knock-on effects which expose the limits of monetary policy

-CreditAg: unlikely that MPC will want to trigger excessive FX depreciation which could fuel financial instability; argues for a more cautious and less pre-emptive approach which could help stabilise GBP; remains bearish on GBP

-Dankse: expect a precautionary 25bp cut in July with indication that further easing could come; do not buy into the story that monetary policy could be tightened due to weaker GBP; relying on Carney’s comment on ‘initial assessment’ in July and ‘full assessment’ in August as rationale

-GS: expect no change in rates on Thursday but still attach a 30% probability of a rate cut; expect 7-2 on rates with Haldane and Vlieghe voting for an immediate cut; BoE will likely signal that asset purchases will begin in August with £100bn bought over 6 months; expect the bulk of the easing to come in August with a further 25bp cut and asset purchases including corporate bonds; July will be the MPC’s initial assessment; minutes will likely show that the policy response will be calibrated in the August QIR.

-JPM: expect a 25bp cut to the Bank Rate in July as well as August; expect the MPC to announce £75bn of further gilt purchases over a 6 month period alongside the November QIR at the latest; JPM look for a one-year extension of the FLS to early 2019; they expect QE purchases to resume by the November QIR with risks tilted towards purchases starting sooner rather than later; JPM expect other forms of credit supply interventions to be deployed quickly should any developing signals of market stress emerge.

-MS: expects BoE to cut rates by 25bp on Thursday; should keep GBP offered and risk bid; sees evidence of a renewed QE programme being priced into the Gilt market; seeing evidence of bonds with a larger available free float outperforming

-RBS: expect a 25bp cut to the Bank rate on Thursday; expecting a cumulative 50bp cut by September MPC meeting but the timing is not clear; Carney has given a clearly dovish signal; RBS believe that not delivering some kind of easing in July would risk undermining the BoE key objective of shoring up confidence

-SocGen: expect the BoE to cut the Bank Rate by 25bp, probably in July, alongside the restarting of QE at the pace of £25bn per quarter; Carney’s June 30 speech put markets on alert for easing ‘over the summer’ but cautioned against rates being too low; they view Carney’s speech as making a first move obvious at the July or August meeting

 

Ashley Joye Managing Partner T +44 (0)20 7422 2975 M +44 (0)7796 308 391 E ashley.joye@archr.com 49 Carnaby Street, London, W1F 9PY United Kingdom ARCHR.COM