Carney’s ‘Brexit-contingent’ hawkish signal means deferred GBP upside - ING

Viraj Patel, Foreign Exchange Strategist at ING, provides his assessment of today's BOE decision, wherein the central bank left its monetary policy stance unchanged but sounded hawkish by saying that rates need to rise earlier and faster than anticipated in November report. 

Key quotes:

“The Bank of England's Brexit-contingent hawkish signal today means meaningful GBP upside may be slightly tempered in the near-term. We expect full upside potential to be unleashed once we get greater clarity on a Brexit transition deal.”

“With our base case that a Brexit transition deal will be agreed, we continue to see deferred gains for the pound – and reaffirm our 1.45 target for GBP/USD. Indeed, based on what we see as four misconceptions in GBP markets right now, we still think there is scope for a positive UK story to drive GBP/USD higher over the medium-term.”

“Investors looking for tactical opportunities may see greater value in EUR/GBP downside - given the looming Italian elections and prospect of some more cautious ECB currency talk. We're looking for a move to 0.86 in 1Q18.”