GBP Monthly Review March 2018

GBP Monthly Review March 2018

February in review

Bank of England Turns Hawkish

  • Inflation returns to 3%
  • MPC ignores Brexit concerns
  • Labour favours customs union
  • Sterling in narrow range
Inflation demands MPC attention

The Bank of England turned more hawkish on inflation as the rate rose back above 3%. More practical action will be necessary to drive it back to towards the Government’s 2% target. A May hike is priced in.

MPC out of Brexit loop

The most recent MPC meeting has decided that Brexit is out of its remit and monetary policy will be determined according to inflation considerations. Latest GDP data shows growth falling to 0.5% YoY.

Labour to continue Customs Union

Any future Labour Government in the UK would negotiate membership of a customs union which would provide tariff free movement of goods. The cost of that policy in both economic and independence terms has not yet been discussed.

Pound narrow range. Medium term target reached

The medium-term target for the pound at 1.4250 has been reached and the pound has retraced below 1.4000. A period of consolidation will be favoured by the BoE as they try to tackle the rise in inflation.


March what to watch

Brexit to determine direction

  • EU to release Brexit terms
  • Transition to be closed ended
  • Irish Border to bring political concern
  • Sterling to react to BoE rate comments
EU Brexit terms to bring reality check

Normal service will be resumed as Brussels gets tough over the cherry picking of the single market and customs union. Financial Services will be excluded from any deal as Frankfurt and Paris try to take precedence.

No open-ended transition

The UK’s hopes for an open-ended transition period will be dashed by Brussels as they expect Brexit to be completed by December 2020.

Irish border issue to continue

The border between Ireland and Northern Ireland has the potential to wreck the Government’s Brexit plans as they will not be able to negotiate away the North’s rights given the hold they have in Parliament.

BoE Inflation concerns to drive rate talk

The Bank of England will continue its Hawkish tone as inflation refuses to fall and negative wage growth continues. The market will continue to price in a hike in May but will expect further increases if inflation fails to behave.

March 2018 : Key Events

  • Manufacturing PMI
  • Net Lending to Individuals m/m
  • Prime Minister May Speaks
  • Construction PMI
  • BOE Gov Carney Speaks
  • Services PMI
  • Halifax HPI m/m
  • Annual Budget Release
  • Manufacturing Production m/m
  • Goods Trade Balance
  • CPI y/y
  • PPI Input m/m
  • Average Earnings Index 3m/y
  • Claimant Count Change
  • Public Sector Net Borrowing
  • Unemployment Rate
  • Retail Sales m/m
  • MPC Official Bank Rate Votes
  • Monetary Policy Summary
  • Official Bank Rate
  • Asset Purchase Facility
  • MPC Asset Purchase Facility Votes
  • Current Account
  • Final GDP q/q
  • Net Lending to Individuals m/m
  • Bank Holiday