GBP: Merrill Lynch says that any rebond of the pound due to the BoE today is an opportunity to sell on the forex

Merrill Lynch believes that the GBP should consolidate on the forex with the BoE's quarterly inflation report, and notes that any rebound provides a selling opportunity.

"A rise in growth forecasts and inflation in the BoE's quarterly inflation report should reinforce the theme of consolidation that we recently discussed. Our analysts suggest a GBP consolidation phase in the short term on the forex, but we continue to favour selling on rallies in anticipation of new lows in Q1 2017.

However, we do not believe that the data will be the main catalyst for this consolidation. Indeed, despite UK Q3 GDP above the consensus, the GBP has been able to maintain its gains. Markets do not mind that the current resilience of data will last. For now, we believe that the consolidation of the short-term GBP will be driven by other factors, such as oversold technical indicators and some easing of political risk premiums, which played a dominant role in the GBP's price action.

The BoE's press conference will also be an interesting event. But it could focus on President Carney's recent decision to extend his term until 2019."