PINCH UPDATE: Interestingly, markets are still...>

UK: PINCH UPDATE: Interestingly, markets are still positioned for a hike from

the Bank of England. The probability of a 25bps hike to the bank rate stands at

61.9%, broadly in line with a month ago but down significantly on the week. We

have previously argued that sharply divergent Brexit outcomes (with 'no-deal'

likely to pummel the pound and a 'soft Brexit' likely to be net positive for

sterling assets relative to current pricing) and the lack of visibility on which

outcome is most likely, will make it difficult for money markets to price the

trajectory for monetary policy. Expectations of a rate hike in 2019 could

reflect expectations of a 'soft Brexit' and a continuation of the BoE tightening

cycle, or rising expectations of 'no deal' and a run up in inflation on the back

of the resulting currency correction (this would coincide with buying of

out-of-the money cable puts that we have seen recently).  

Please see: https://tinyurl.com/y7fwznmc