BoE to hike rates not until May 2016 - Rabobank

FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank noted the conditions surrounding Sterling and sight may 2016 as first rate hike from the BoE.

Key Quotes:

"Last week’s presentation of the Quarterly Inflation Report and yesterday’s news that the UK is now technically in deflation have taken the wind out of the sails of this morning’s release of the Bank of England’s May minutes."

"The Bank’s view is that the current period of absent price pressure will not last and that inflation would be higher by the end of the year as the impact of the drop in oil prices began to drop out of the year-on-year rate."

"While there is every reason to believe that the UK’s flirtation with deflation will not last, the Bank is still likely to be cautious. Arguably the most worrying aspect of recent UK inflation data releases is not the headline rate but the lack of potency in the core inflation rate."

"For most of period since UK real wages have been falling and fiscal austerity has been a constraint. Recently real wages have turned positive, but the July 8 budget is likely to underpin the fact that there will be no escape from austerity for some time yet."

"The weakness of underlying demand was a factor in our recent decision to push back our call for the first BoE rate hike of the cycle to May 2016."