RANsquawk PREVIEW: BoE June Minutes due at 0930BST/0330CDT
At their most recent rate-setting meeting, the BoE chose to keep all tools on hold, in a decision that was thoroughly overshadowed by the PBOC's rate-cut surprise mere seconds before the BoE release. The publication of the minutes today will shine more of a light onto the way the board is currently approaching policy, however it should be factored in that the BoE have been particularly active across the past month with their indirect easing announcement at Mansion House last week.
As for the minutes release, it is likely to reflect the ongoing discussions arising from members such as Posen who have argued the case for alternative easing methods, including private asset purchases in the stead of Gilt buying. Another candidate from the board who may have been swayed to the more-QE camp is Paul Tucker, who has been particularly dovish over the past 30 days, particularly in his comment that the BoE and UK government must do more to ease credit conditions, a seemingly direct precursor to Governor King's Mansion House speech. The other, more obvious, candidate voting for further asset purchases will be David Miles, who has voted to boost the cap on the APF for a significant number of months. One particular factor to bear in mind is whether the MPC were aware of the upcoming coordinated action between the UK Treasury and the central bank, as if so, the board may have been content with keeping the total quantity of asset purchases on hold to await the affects of the Mansion House policies. Should the vote count reflect this, the distribution could falsely appear as hawkish, when in fact, the board are simply holding tight, awaiting stimulus.
Should the minutes be released with no particular surprises, market reaction is likely to be relatively muted, as the asset classes, most significantly the UK swaps market, have begun to price in further easing measures from the bank. As such, UK participants will more than likely look ahead to the BoE's next rate decision due on the 5th of July as the consequent flashpoint for BoE activity.
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As for the minutes release, it is likely to reflect the ongoing discussions arising from members such as Posen who have argued the case for alternative easing methods, including private asset purchases in the stead of Gilt buying. Another candidate from the board who may have been swayed to the more-QE camp is Paul Tucker, who has been particularly dovish over the past 30 days, particularly in his comment that the BoE and UK government must do more to ease credit conditions, a seemingly direct precursor to Governor King's Mansion House speech. The other, more obvious, candidate voting for further asset purchases will be David Miles, who has voted to boost the cap on the APF for a significant number of months. One particular factor to bear in mind is whether the MPC were aware of the upcoming coordinated action between the UK Treasury and the central bank, as if so, the board may have been content with keeping the total quantity of asset purchases on hold to await the affects of the Mansion House policies. Should the vote count reflect this, the distribution could falsely appear as hawkish, when in fact, the board are simply holding tight, awaiting stimulus.
Should the minutes be released with no particular surprises, market reaction is likely to be relatively muted, as the asset classes, most significantly the UK swaps market, have begun to price in further easing measures from the bank. As such, UK participants will more than likely look ahead to the BoE's next rate decision due on the 5th of July as the consequent flashpoint for BoE activity.
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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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