As the markets price in 100% certainty on an interest rate cut on Thursday, it almost seems certain that Mark Carney will pull the trigger on a rate cut, I have no reason to believe he will.
Data does not support an interest rate cut
Although views seem to highlight otherwise, there has been very little economic data that supports a decision to cut rates, although consumer confidence and PMI manufacturing data was down, PMI construction figures came in better than anticipated, and only marginally weaker than the last release.
Housing prices seem to be on the rise, and a number of key retail chains have posted growth since Brexit, so what does the Bank of England have to go on?
The UK is still predicted for growth
Although some reports show the UK will be hit by a 50/50 recession, there is no evidence to suggest that the UK will hit a technical recession, the UK is still expected to grow 1.7% this year and 1% next year.
Foreign investment has rocketed in the wake of Brexit, due mostly to the cheaper Pound, next week’s NIESR release could provide clues to how well the economy has performed post-Brexit, but nothing prior to this, in my opinion, warrants a rate cut.
The markets this morning are piling into the Pound which has seen GBPEUR exchange rates pull through the 1.192-3 barrier, I would have expected rates to fall prior to tomorrow’s update, another reason as to why I believe rates will be left on hold.
If you need to buy Euros, I would still recommend doing so prior to tomorrow’s update, a rate hold may push rates back to 1.20 whilst a rate cut could be significantly worse, possibly testing ranges of 1.15-16, it may be too much of a risk to wait.