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13 Aug 2013
Flash: GBP/USD could move on BoE Wednesday – BMO Capital Markets
FXstreet.com (New York) - With the inflation data now out of the way, the focus will be on the unemployment rate tomorrow, where a better or worse figure will warrant some movement in the GBP and UK rates, suggests Greg Anderson at BMO Capital Markets.
Key quotes
“If anything though, the mistake some will make is to continue associating the new BoE “threshold” for the unemployment with a Fed-style target, and put too much emphasis on the monthly fluctuations in the actual, headline rate (currently 7.8%).”
“From a GBP perspective, we view the BoE’s unemployment rate threshold as more of a guideline, and instead attach a lot more importance to the CPI data and pronouncements from the FPC/MPC. To paraphrase, even Mark Carney himself was quick to regard the unemployment rate as the best poor estimate for the level of spare capacity within the UK economy at last week’s BoE press conference, which means that policy can carry on being very stimulative even as the 7.0% threshold approaches if bank lending and/or CPI growth rates are below what the BoE would like to see or need to be concerned about.”
Key quotes
“If anything though, the mistake some will make is to continue associating the new BoE “threshold” for the unemployment with a Fed-style target, and put too much emphasis on the monthly fluctuations in the actual, headline rate (currently 7.8%).”
“From a GBP perspective, we view the BoE’s unemployment rate threshold as more of a guideline, and instead attach a lot more importance to the CPI data and pronouncements from the FPC/MPC. To paraphrase, even Mark Carney himself was quick to regard the unemployment rate as the best poor estimate for the level of spare capacity within the UK economy at last week’s BoE press conference, which means that policy can carry on being very stimulative even as the 7.0% threshold approaches if bank lending and/or CPI growth rates are below what the BoE would like to see or need to be concerned about.”