BoE likely to delay rate rises after GDP – Nomura

Following latest weaker-than-expected UK GDP print, analysts at Nomura have changed their forecast for the Bank of England (BoE) and have shifted out by a quarter (i.e. to August) the next 25bp rate hike from the MPC.

Key Quotes

“We continue to think that following the recent (and in our view temporary) soft-patch in the data the Bank will resume on a path of a six-monthly hiking cycle. After all, we remain upbeat on global growth and while Brexit poses a downside risk to the UK specifically we still see the UK economy growing at a rate close to its new – lower – trend.”

“FX strategy: Reducing Long GBP/CHF position by half

We are not fading the move in GBP for now. The market will likely continue to head lower in the short term especially in GBP/USD, as that is where the bulk of long GBP positioning lies. It’s when we get to this week that any fresh short positioning in GBP may struggle, as we expect the April PMIs to show signs of bouncing back. In our view, it’s not just the BoE that will drive GBP over the next month, after the May Inflation Report is out of the way the government’s position on the customs union may change owing to parliamentary pressure heading into the June EU summit. If Theresa May changed the government’s position, but does not face a leadership challenge this could lead to a significant upward move in GBP into year-end, in our view.”