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Gold Inching Toward Bull Trigger

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  • After a busy week for data last week in which labour market data was encouraging, inflation was higher than expected but retail sales disappointed, focus now switches to Thursday's MPC policy announcement.
  • We will release our full Bank of England preview later this week but note that expectations are low in terms of any changes to policy. Of the sell-side previews we have read so far there is a unanimous expectation of a 9-0 vote for rates on hold and an 8-1 vote of the APF target remaining unchanged (with Haldane again excepted to vote for a reduction). There are also no expectations that the pace of purchases will be adjusted (with the May meeting having set out a pace of purchases until the August meeting). There is some disagreement over the magnitude of the risk of another MPC member joining Haldane in voting for a reduction in the APF target (which would end QE before mid-December). In general, consensus expects this to lead to a more upbeat statement but with acknowledgement of increased uncertainties. The upside risks stem from better growth and higher inflation data with the increased uncertainty from the delaying of lockdown, increasing case Delta variant case numbers (and by some the Northern Irish protocol disagreements with the EU). Needless to say, if an additional member votes to end QE early that would be a big deal to the market. Although no change is expected at this meeting, a number of analysts have pushed forward their expectation of the first Bank Rate hike.