Brexit commentary from Bank of America Merrill Lynch
The market is pricing in a 25 basis point hike from the Bank of England by May 2020 with about a 33% chance of a hike this May. That is too aggressive, Bank of American Merrill Lynch analysts say:
"In our view all options remain on the table; from May's deal to no deal to no Brexit, with the sizes of the tails in this distribution just as important for market pricing as small shifts in the mode. More importantly, an extension of the Article 50 period looks increasingly likely in most scenarios, leading to a persistence of the current uncertainty. This combined with the weakening growth data will make it hard for the BoE to hike rates in the near term," they write in a note.
They believe a cut on a no-deal Brexit is more likely than a deal and a hike in May.
