7 Aug 2015
Hawks disappointed by BoE - Danske
FXStreet (Guatemala) - Analysts at Danske Bank explained that the market was clearly positioned for a more hawkish BoE.
Key Quotes:
"For now, we stick to our view that BoE will hike in Q4 15 (most likely in November) but as mentioned above it depends on the development of inflation. Hence, we still project a significant rise in UK interest rates in the coming months."
"GBP weakened 0.7% versus EUR and 0.85% versus USD. According to our short term financial models, pricing action in the FX market seems fair given the decline in UK yields. However, EUR/GBP still trades 1.3 standard deviation above our model’s short term estimate of 0.69."
"Fundamentally, we still expect EUR/GBP to trade lower in the coming months driven by relative interest rates. We target the EUR/GBP at 0.69 in 3M to 6M but stress that the risks remain that the cross temporarily undershoots our targets. While speculative investors gradually have bought GBP since the beginning of the year, non-commercial positioning is fairly neutral, according to the latest IMM positioning data. Hence, there should room for further GBP longs to be added."
"Relative rates are also expected to be an important driver for GBP/USD in H2. Based on our interest rate forecasts, where we expect the Fed to hike in September, the repricing of 2Y US interest rates is expected to much larger relative to the 2Y segment in UK."
Key Quotes:
"For now, we stick to our view that BoE will hike in Q4 15 (most likely in November) but as mentioned above it depends on the development of inflation. Hence, we still project a significant rise in UK interest rates in the coming months."
"GBP weakened 0.7% versus EUR and 0.85% versus USD. According to our short term financial models, pricing action in the FX market seems fair given the decline in UK yields. However, EUR/GBP still trades 1.3 standard deviation above our model’s short term estimate of 0.69."
"Fundamentally, we still expect EUR/GBP to trade lower in the coming months driven by relative interest rates. We target the EUR/GBP at 0.69 in 3M to 6M but stress that the risks remain that the cross temporarily undershoots our targets. While speculative investors gradually have bought GBP since the beginning of the year, non-commercial positioning is fairly neutral, according to the latest IMM positioning data. Hence, there should room for further GBP longs to be added."
"Relative rates are also expected to be an important driver for GBP/USD in H2. Based on our interest rate forecasts, where we expect the Fed to hike in September, the repricing of 2Y US interest rates is expected to much larger relative to the 2Y segment in UK."