BoE on hold but may want to tailor expectations somewhat

The BoE is expected to keep the Bank Rate and asset purchase decision unchanged at its October meeting (Thursday) in line with market expectations. Nonetheless, it is believed that the tone of the MPC from the release of the policy minutes could sound on the hawkish side to some, as the MPC will want to lean against recent market expectations that have been pushing back the date of the first hike into 2017. In particular, the MPC will insist that global woes will likely not derail the BoE's strategy at this stage given current domestic strength. 

"We see downside risks for EURGBP in the week ahead. On the data front, we expect services confidence (Monday) to rebound slightly from the unexpected decline in August (56.1 after 55.6), although nonetheless pursuing gradual moderation, in line with our growth forecasts", says Barclays.

Moreover, August total production (Wednesday) is expected to rebound 0.4% m/m (1.5% y/y), driven by a pickup in manufacturing (0.5% m/m, 0.0% y/y) as motor vehicle production rebounded a whopping 15% in August. All in all, UK economic growth, while slowing, remains relatively robust, but fiscal consolidation will likely weigh on activity in an environment of surprisingly low inflation and the underpriced impending EU referendum. 

"We continue to forecast material GBPUSD depreciation and only modest GBP outperformance vis-à-vis the EUR", added Barclays.