BoE: Focus to be largely be on the number of dissenters - ING

Today's focus of BoE will largely be on the number of dissenters, the MPC's guidance around forthcoming rate hikes and the Bank's economic forecasts and a BoE ‘goldilocks job’ will be neutral-mildly bullish for GBP.

Key Quotes

“As for dissenters, two members voting for a 25bp rate increase today would be a clear signal that a May BoE rate hike looks more than likely (>50%). Yet, equally, we do not think that a 9-0 vote to stay on hold – and no dissenters today – changes the implicit odds of a May rate hike; with any additional BoE policy tightening all but contingent on a smooth Brexit process, a prudent policymaker may opt to wait out for greater clarity on a UK-EU transition deal – likely to materialise over the next 4-6 weeks ahead of the 22-23 March EU leaders summit – before committing to a rate hike. Thus, we wouldn't be surprised if the resident hawks McCafferty and Saunders opted to remain on hold today – and would not see this as a reason for GBP to move lower.”

“As for the projections – and beyond the expected upgrade to the GDP profile – the key focus is on the MPC's judgement on the supply potential of the UK economy. The key phrase for a May hike here is that the economy is ‘close to operating at full capacity’. Yet, the Bank upgrading the UK's potential growth rate – but taking a more patient policy approach to absorb the greater excess spare capacity – is not exactly a bad thing for GBP's medium-term outlook.”

“FX implications: While it may be tempting for GBP bulls to ask Governor Carney ‘Please Sir, I want some more’, we think the BoE will be looking for a ‘goldilocks job’ today – that is sounding not too hawkish or not too dovish, but getting the balance just right to keep markets where they are. Should this come as a disappointment to GBP markets (we don't see why it should), our preferred tact remains looking to buy GBP on dips. Investors looking for tactical opportunities may see greater value in EUR/GBP downside from any hawkish BoE tilt given that the dollar is staging a mini-recovery. We're targeting 0.86 for 1Q18 – with the Italian elections and more cautious ECB talk keeping EUR/GBP upside in check. We are still bullish on GBP/USD over the medium-term (targeting 1.45).”