BoE not expected to tighten policy earlier or more aggressively - RBS

FXStreet (Łódź) - Paul Robson from RBS believes that that due to the slowdown in jobs growth and continued soft wage pressures markets are not pricing in a earlier or more aggressive policy tightening by the BoE.

Key quotes

"We read policy divergence in global currency markets as the most relevant narrative for sterling post the Scottish referendum."

"Our primary focus is labour supply developments."

"Increased potential supply due to a weak Euro area economy suggests there may be far more spare capacity than the official unemployment rate suggests. If we're right, then wage growth many stay lower than many expect."

"GBP/USD and EUR/GBP look a Fed and ECB story in the near term."

"Judging by the USD's positive reaction to last week's FOMC statement, the hurdle for a hawkish interpretation of both US data and Fed communications appears lower than we previously expected."

"We hence look for the USD up-trend to remain intact and hold to our 1.60 or below year-end target for GBP/USD."

"At the same time, negative interest rates look set to remain a powerful EUR negative."

"Until Euro area data start to turn up, further EUR weakness appears on the cards."

"This is seen pushing EUR/GBP lower over the coming year.