Societe Generale strategists analyzes- the Bank of England’s (BoE) upcoming meeting, expecting Bank Rate to remain at 3.75% with some hawkish dissent. They note easing inflation expectations and a loosening labour market, but also higher energy prices and government income support. Their base case is for policy to stay on hold through 2026, while GBP/USD seasonality looks bearish in August.

BoE stance and Pound seasonality

"The BoE is the penultimate G10 central bank to meet before the curtain falls on July – the BoJ meets tomorrow - and like the Fed yesterday, expectations are overwhelmingly for no change in bank rate at 3.75%. Hawkish dissent is likely by at least two members, Huw Pill and Megan Greene."

"Our base case remains for the policy to stay on hold through 2026 with a risk of higher rates not ruled out depending on how the conflict evolves in the Gulf."

"The OIS curve is pricing around 40bp by year-end which is aggressive considering that policy is mildly restrictive and the labour market is loosening."

"The easing in YouGov inflation expectations over the past month and glacial progress in headline CPI and private sector wages will be offset by the rebound in energy prices and first policy steps by the government to support household incomes."

"For cable [GBP/USD], the unwinding of the Burnham bounce could have further to go in August when seasonality turns bearish."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)