Analysts: BoE to refocus on wage growth
BP/USD is consolidating in a tight $1.6380/6430 range ahead of the BoE inflation report on Wednesday.The central bank is widely expected to signal that, despite the sharp fall in unemployment, interest rates are likely to remain on hold for a loner period.
"We expect the MPC to replace its existing forward guidance framework with one based on a broader range of variables, perhaps with a greater emphasis on wage developments," Goldman Sachs projects.
BBH strategists agree on that issue: "Regardless of the unemployment rate, the labor market cannot be considered tight if wage growth remains weak. Unemployment rate is regarded as a lagging indicator, has little to do with the overall economy, and more importantly, with inflation."
Such a pessimistic view is clearly bearish for the British pound.