This week’s parliamentary grilling of Carney and other MPC members left the market with the impression that the BoE has a balanced approach to Brexit risks, though Chief Economist Haldane continued to voice a negative bias to their forecasts.
Debating of Article 50 bill is progressing smoothly for May’s government and should drift from market attention until the 8 March budget.
The next two weeks should see a series of hints and leaks of the budget’s content. Although the OBR has warned against a loosening of fiscal policy, the better than anticipated path for this year’s deficit (had been forecast to be close to 2015-16 deficit of over GBP70bn) should allow for positive news. If CBI trends reflect recent lower retail sales, GBP should be capped, but the BoE’s stance and the likelihood of a prudent budget should provide a firm base and see GBP strengthen within its recent ranges (GBP/USD 1.20-1.28, EUR/GBP 0.8850-0.8175).