GBP: Danske Bank says BoE could lower rates in November, stay short on the GBP

Danske Bank believes that the BoE is preparing a new rate decline for the month of November, with a downward impact on the GBP on the forex.

"Yesterday, the BoE kept its monetary policy unchanged as expected. The BoE has left the door open for more easing later this year if the data meets August's projections. However, the BoE noted that the probability has decreased as short-term indicators have been better than expected.

We maintain our view that the BoE will lower its key rate by 15 points from 0.25% to 0.10% in November, but this will largely depend on coming months' data. It is interesting to note that the BoE is focusing more on activity indicators, not inflation, as it accepts that it can exceed the target in order to support economic activity in the coming years. The market currently expects a 6-point rate cut in November and 11 points in total by the end of the year.

We expect the EUR/GBP to rise on the forex in the coming months. Our expectations for a decline of the GBP is driven not only by the BoE's easing, but also by the considerable imbalance in the UK economy. Political uncertainty with the upcoming negotiations on the Brexit will also weigh on the GBP."