The consensus expect no change in the BoE’s policy stance with the MPC leaving the Bank Rate at 0.5% and stock of asset purchases at GBP375bn (Thursday), therefore issuing no statement. The MPC’s discussion will likely have focused on the aftermath of the general elections, including the possible impact of the EU referendum, as well as the release of Q1 GDP breakdown, showing lower levels of household consumption growth. GBPUSD depreciated more than 1% last week and is likely to remain under pressure this week given our sub-consensus PMI forecasts. “We look for the Manufacturing PMI index (Monday) to have increased to 52.5 in May (consensus: 52.8) from the previous reading of 51.9, but we expect Services PMI (Wednesday) to drop to 59.0 (consensus: 59.1) from 59.5 in April”, says Barclays.Looking ahead, tighter fiscal policy is likely to reduce the degree of UK economic outperformance versus the euro area, resulting in more accommodative BoE policy and more moderate EURGBP depreciation.
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