BoE could hike rates in November – Danske Bank

FXStreet (Edinburgh) - In the view of Signe Roed-Frederiksen, Senior Analyst at Danske Bank, the Bank of England could start its hiking cycle towards the end of this year.

Key Quotes

“Today focus in FX markets will turn to the USD and the GBP on the back of the releases of US CPI data and UK earnings and unemployment figures”.

“While our expectations for today’s figures do not deviate substantially from market consensus we still look for a general improvement in economic data in the coming months to support our call for an earlier-than-market-priced time of rate hike take-off: we expect the Fed to hike in September and BoE to hike in November”.

“Importantly, irrespective of UK data the upcoming general election on 7 May will likely be a source of GBP weakness and higher volatility”.

“While we think that the election risk has been priced in relatively well in option markets already, we think a full risk premium has yet to be priced into the spot rates”.

“GBP softness should, however, primarily be a concern for GBP/USD, and as we expect the USD to perform in the coming months, EUR/GBP could continue to trade lower despite an increased political risk premium being priced into GBP”.