BoE's Greene: Worth waiting before deciding on rate hikes

What the desk is arguing

The desk posits that the BoE is inclined to wait before making any decisions on interest rate hikes, especially given the uncertainties surrounding the US-Iran war. Greene's previous hawkish stance contrasts with her current neutrality, as she weighs the potential economic fallout from geopolitical developments.

Evidence from the market indicates a 42% probability of a rate hike in June, with traders closely monitoring upcoming UK economic data to inform their positions. The market is also pricing in a total of 58 basis points of tightening by year-end, underscoring the importance of both domestic data and international events in shaping BoE policy.

Where it sits in our coverage

Our consensus target for GBP/USD is 1.075, with a range between 1.04 and 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

This view aligns with jpmorgan, which anticipates a gradual tightening cycle, while diverging from bofa, which remains more cautious about rate hikes. The desk's call sits at the upper bound of the consensus range, reflecting a more optimistic outlook on potential rate increases.

How other firms see it

Firms like jpmorgan and citi are aligned with the desk's cautious optimism regarding rate hikes, emphasizing the need for a careful assessment of economic conditions before acting. Conversely, bofa and deutsche express skepticism about the timing of rate increases, citing concerns over economic growth and inflation persistence.

Key currency pairs to watch include GBP/USD, which is directly influenced by BoE decisions, and EUR/GBP, as shifts in interest rate expectations could also impact the Eurozone's monetary policy outlook.