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UK

UK Comment — BoE on hold as Brexit clouds outlook

  1. As expected, no change to monetary policy - policy rate kept at 0.75 percent
  2. Slower growth expected in the near term. Longer-term estimates affected by inconsistency due to Brexit
  3. We expect the BoE to remain on hold as it awaits Brexit... which will probably be postponed again

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

Global Macro Comment — US and China step away from the brink; rate cuts in July (Fed), September (ECB)

At the G20 summit, Xi Jinping and Donald Trump stepped away from the brink and agreed on a temporary, but argua-bly fragile, trade truce. We have had rate cuts from the Fed next year in our forecasts for some time, but we now ex-pected to see them sooner. Despite it likely being a close call, we expect the Fed to cut its interest rate by 25bp in July and to deliver a cumulative 75bp of cuts early next year. We expect the ECB to adjust forward guidance in July, cut rates in September by 10bp and likely introduce quantitative easing thereafter.

Erik Meyersson, Senior Economist | erme03@handelsbanken.se

UK Comment — UK consumer price inflation eases in May

  1. CPI down to 2.0% and core CPI down to 1.7%
  2. Cost pressures also ease in May
  3. Inflation trend should not affect BoE’s decision – policy to be kept unchanged tomorrow

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

UK Comment — UK labour market remarkably resilient despite Brexit

  1. Unemployment unchanged and wage growth slightly stronger in April
  2. Economic activity is easing, GDP and IP numbers worse than expected
  3. Brexit will eventually increase unemployment, we believe

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

UK Comment — UK PMIs continue to signal stagnation

  1. Services sentiment pulled up by slight improvement in new orders
  2. Overall sentiment pulled down by manufacturing and construction weakness

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no

UK Comment — Theresa May is forced out – likelihood of a hard Brexit increases

  1. A Brexit hardliner will probably take over as PM, most likely Boris Johnson
  2. With a Brexit hardliner, the likelihood of a no-deal Brexit increases, in our view
  3. We adjust our pound forecast accordingly and expect a weaker pound ahead

Kari Due-Andresen, Chief Economist Norway | kadu01@handelsbanken.no