So say BOA/Merrill Lynch in their client note. Timely given today's firmer tone. My own preview I posted here earlier
The note comes courtesy of our friends at efx.news.com. Sign up for your trial here
Before Monday's UK PMI services drop, Bank of America Merrill Lynch base case was that the BoE will unlikely make big changes to their message, while highlighting risks from abroad, but strong domestic data.
"That PMI services drop to 53.3 from 55.6 will, however, inject more caution into the BoE's language in our view. The main risk now is that we get a much more dovish message and/or vote than last month.
"That said, on balance, we look for another 8-1 vote to keep rates on hold. On the whole domestic demand indicators remain strong. So to react immediately to one bad reading could give the impression of very serious worries at the BoE. For that reason, we do not look for a message dovish enough to be consistent with market pricing for UK rates
Despite global factors driving near-term GBP sentiment, the BoE rate decision and voting pattern will matter for the pound this week. Although the market has pushed back its timing for the first UK rate hike into 2017 a downbeat assessment by the Bank of England and the risk of a 9-0 vote could still lead to further GBP pressure. The stars (and the prevailing tide) are aligned for a dovish slant given the recent actions/words of other global central banks and will still weigh on GBP despite the significant paring back of rate hike expectations.
Nonetheless, we feel that in the aftermath of the service sector PMI reading, there are asymmetric risks building up for the event. Were the tone to remain broadly unchanged from September, then this should provide a fillip to GBP,"
