BoE to hike twice this year, EUR/GBP poised to drop further – Danske Bank

Analyst at Danske Bank Mathias Mogensen sees the BoE raising rates twice in 2018, while the European cross is seen grinding lower in the next months.

Key Quotes

“The Bank of England (BoE) sent a hawkish message to the market yesterday at its MPC meeting and in our view clearly signalled that it is launching a hiking cycle. We have changed our call on the BoE and now expect two rate hikes in 2018 (in May and November). This is more hawkish than consensus and market pricing”.

“In our view, the case for a lower EUR/GBP has strengthened as we now expect the BoE to ‘out-tighten’ the ECB and we have lowered our EUR/GBP forecast to 0.88 in 1M, 0.87 in 3M (previously 0.88), 0.86 in 6M (0.87) and 0.84 in 12M (0.86). We see risks skewed towards the cross both breaking lower sooner and considerably lower than our forecast indicates”.