GBP: QT announcement in focus today – ING

The Bank of England (BOE) will likely keep rates on hold today, following a hawkish cut in August. Markets are also pricing in no chance of a cut today, but the November decision still appears to be hanging in the balance. The focus will be on any new forward guidance, the vote split and the QT announcement, ING's FX analyst Francesco Pesole notes.

EUR/GBP to be gently supported into November’s BoE and budget events

"Regarding forward guidance, we don’t expect anything new. The BoE has pointed to cautious and gradual easing for some time, and recent data hasn’t pointed to a shift to directional guidance. Markets should continue to infer the MPC mood from the vote split. Our call is 6-3, with Swati Dhingra, Alan Taylor and Dave Ramsden voting for a cut. That might be read as slightly dovish, but would cause a major repricing, which remains very much tied to incoming data."

"The QT announcement has the largest market impact potential. We expect a slowdown in the annual gilt reduction target to £75bn, which recent consensus estimates. Expectations are likely that there will be some shift to younger maturities to lift pressure off the struggling long-end of the gilt curve."

"Any negative surprises on QT today could trigger gilt sell-offs that have proven to spill over significantly onto GBP. Our baseline remains for a gently supported EUR/GBP into November’s BoE and budget events."