BoE seen hiking rates in November – UOB

FX Strategists at UOB Group believes the BoE could raise rates at the November meeting.

Key Quotes

“GBP/USD leapt above the 1.36-figure after the Bank of England (BoE) made clear last week that markets are underestimating the possibility of an interest rate hike this year. The clear message was sent out by BoE Governor Mark Carney after Thursday’s MPC meeting and reinforced by a hawkish speech by BoE policy maker Gert Vlieghe, a one-time dove. In just two days, GBP rose around 3 percent against the USD”.

“It looks as though Carney and Vlieghe will be joining their hawkish colleagues Ian McCafferty and Michael Saunders, who have voted to raise rates in the last three meetings. Only one more member now needs to turn to give a narrow 5-4 majority on the committee. Andy Haldane could easily be that additional hawk (after all, he had said in June that he might vote for a rise by end-year)”.

“We had previously expected no change in rates this year or next, particularly in the face of Brexit uncertainties. However, given the BoE’s clear signal that it intends to raise rates in November; we now expect a 25bp rise at the 2 November meeting. Note that markets are now pricing in around 61% chance of rate hike at the November meeting (versus 22% as priced in by markets earlier this month)”.