TD on the Bank of England decision
TD is calling the BOE's bluff.
The line from the BOE is that there will be an "ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent." However that's on hold because of Brexit uncertainty.
TD is starting to believe that even if Brexit uncertainty was resolved, the BOE still wouldn't be tightening because of softening global growth and lower rates elsewhere (also presumably because the pound would be much stronger).
The "message is increasingly unbelievable in a world where other major central banks are looking at delivering more stimulus," they write.
TD believes market participants should ignore an tightening hints from the BOE. They also warn that the August inflation report will be difficult to interpret because they assume an orderly transition through Brexit, while the market is still factoring in some chance of a no-deal exit.
Our base case sees the MPC continuing to include the reference to rate hikes "at a gradual pace and to a limited extent," although we do see a non-negligible risk of that phrase being dropped.
TD doesn't see any BOE hikes through at least the end of 2002.
As for the pound, they see all the markets focus remaining on politics and Brexit. Given that, any hawkish talk from the BOE will be burshed aside.
"All else equal, Monday's push below support at 1.2350 without much difficulty suggests additional weakness looks likely ahead of the policy decision," they write.
They see rising odds of a fall below 1.20, especially with the EU taking a harder line.