I guess the only real place to start is the BoE. While the market is still finding it difficult to digest the fact The Bank could be going as soon as November, I want to lay out a few scenarios on the potential tightening path and its consequences for sterling. As for those who have read my two previous posts, GBP has been summer fascination and the September MPC was what I was looking for. In my opinion, what the market missed and in fact continues to discount, is how much of an EM the UK has become. Sure, wage growth sucks, spare capacity continues and a lack of domestic investment due to uncertainties regarding Brexit persists, but it doesn't matter. With inflation near 3% and EUR/GBP on a tirade towards parity, Carney had to step in and defend the currency. Yes, the pass through from the post Brexit led inflation is fading, but if Carney did not prevent GBP from falling through the cracks against EUR, above target inflation would reappear again.
September 18
September 18
September 18
I guess the only real place to start is the BoE. While the market is still finding it difficult to digest the fact The Bank could be going as soon as November, I want to lay out a few scenarios on the potential tightening path and its consequences for sterling. As for those who have read my two previous posts, GBP has been summer fascination and the September MPC was what I was looking for. In my opinion, what the market missed and in fact continues to discount, is how much of an EM the UK has become. Sure, wage growth sucks, spare capacity continues and a lack of domestic investment due to uncertainties regarding Brexit persists, but it doesn't matter. With inflation near 3% and EUR/GBP on a tirade towards parity, Carney had to step in and defend the currency. Yes, the pass through from the post Brexit led inflation is fading, but if Carney did not prevent GBP from falling through the cracks against EUR, above target inflation would reappear again.