UK: May’s government remains vulnerable - Westpac

UK politicians may be on summer recess but May’s government remains vulnerable to an internal putsch or inability to sustain external support as it determines their Brexit negotiation stance, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“MPC’s rate debate has been ameliorated by the pullback in inflation. The BoE’s quarterly Inflation Report will provide a timely update on the Banks’ inflation and growth projections and their assessment of Brexit risks. 2Q GDP highlighted UK’s dependency upon retail services while household finances are strained due to negative real wage growth. Although (CBI) business optimism remains high, the variety of surveys in the coming week will provide a critical context for the BoE.”

“If confidence slips into their meeting, a neutral stance from the BoE would likely affirm the upper bound of GBP/USD’s 1.25-1.32 range. EUR/GBP resistance at 0.90 is highly dependent upon EUR sustaining its uptrend.”