Market chatter about rate cuts this week could be well wide of the mark
I can't understand this sudden expectation for the BOE meeting this week. I thought Mr C was pretty damn clear the other week;
"The Committee will make an initial assessment on 14 July, and a full assessment complete with a new forecast will follow in the August Inflation Report. In August, we will also discuss further the range of instruments at our disposal."
First off, I don't completely rule out any action on Thursday. As we've learnt, sometimes painfully, you can never say never as far as central banks go.
What we do know is that they've certainly not had any real data to shows how the economy is faring post-Brexit. We're still getting June data, some of which would have been taken before the vote. At most they'll be seeing signs of pre-Brexit worry, rather then post-Brexit effects (see last weeks construction PMI).
Eamonn's highlighted a very important article overnight about watching the BOE's Agents Summary of Business Conditions reports. They produce both quarterly reports and monthly updates. The next is due 20th July. The last report came two days before the vote. These were the highlights of that report;
The annual rate of activity growth had remained moderate. Turnover growth had eased further in the business services sector, partly reflecting some delays in clients' decision-making ahead of the EU referendum, but it had picked up in consumer services. The annual rate of decline in manufacturing output had waned.
Bank credit availability had stabilised, after a prolonged period of easing, remaining above normal for most contacts. Capital market issuance and corporate finance activity had slowed recently. Peer-to-peer lending had continued to expand.
Employment growth and recruitment difficulties had eased, partly reflecting slower demand growth among business services companies. But total labour costs per employee had edged higher due to the introduction of the National Living Wage. Inflation had remained subdued.
On Thursday, at most, I think we get further clues on what tools the BOE may use. Expect very dovish comments full of warnings. I very much doubt they'll change policy at all but that may not stop them laying the ground work for August.
If the pound is getting a kicking due to expectations of a rate cut Thursday, I'm going to look to hoover up longs into the meeting as I don't think they're cutting this week, and that will cause an announcement pop. Picking a time and entry point is key and my next task.
Nothing in his hands but is there something up his sleeve?
