US investment bank JP Morgan out with their latest thoughts on Brexit 23 May 2016
- rate cut possibly as early as August 2016
- using the Taylor Rule on their assumption of growth slowing to 0.5% q/q in H2 2016, unemployment rate rising to 5.6% over the next year, a 50bp rise in mortgage spreads, a rise in inflation to 2.5%/3% by end of 2017 and little change in inflation expectations, "the BoE would respond by cutting" interest rates by 55bps.
- GBP falling by 30% would make a rate cut unlikely
I'm not sure the Old Lady would let it go that far but hey we can throw it all in the mix/bin as you prefer.
Meanwhile yen demand/Brexit scaremongering/softer equities sees GBPJPY lower dragging GBPUSD down to session lows of 1.4475. EURUSD demand at 1.1200 sees EURGBP pop back up to 0.7740.
Offers above 0.7750 still with support/bids on cable into 1.4450