GBP: We're not as dovish as some on the BoE - ING

Today's Bank of England meeting should be a market mover, ING's FX analyst Chris Turner notes.

GBP/USD can get distorted by global risk sentiment today

"While a 25bp rate cut to 4.25% is widely expected, what is probably the single most important area today is what the BoE does with this following sentence: 'Based on the Committee's evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate'."

"Those more dovish in the market are looking for this 'gradual and careful' phrase to be dropped/amended to signal a sharper set of BoE rate cuts. BoE is ready to drop that phrase just yet. Given that the market is now pricing four 25bp rate cuts this year and we expect three (May, August, November), if BoE easing remains 'gradual and careful', sterling could rally."

"For reference, the FX options market prices an 80 USD pip break-even range for GBP/USD over the next day. And for EUR/GBP, that break-even is 39 GBP pips. GBP/USD could get distorted by global risk sentiment today, but we would say a less dovish than expected BoE today could drive EUR/GBP to the 0.8435/40 area."