• Pound Rises as Traders Await ‘Key’ Speech From BOE’s Broadbent

The pound advanced against all its major peers before a speech by Bank of England Deputy Governor Ben Broadbent, which investors will scour for clues of his position amid a split between members of the Monetary Policy Committee.

The pound has been boosted in recent weeks amid signs of a hawkish shift among BOE policy makers, who voted 5-3 to maintain interest rates at a record-low in June. That’s left markets currently pricing in a more than 60 percent chance of a 25-basis-point hike by the end of this year, according to MPC-dated SONIA. Broadbent, who is scheduled to speak at 1:30 p.m. in Aberdeen, Scotland, sided with the majority at last month’s meeting, and has not made any public statements since.

• Broadbent’s comments will be “key” for markets, James Athey, senior investment manager at Aberdeen Asset Management Plc, says in an interview with Bloomberg television
  • “I am not sure August is as live as some suspect because that maths doesn’t quite seem to add up.”
  • Given “the hawks and doves we know about, assuming that Broadbent stays within that dovish community, I still think they are probably a vote short at this stage”
• GBP/USD rises 0.2% to 1.2912, EUR/GBP falls 0.2% to 0.8834, its first decline in four days.
• Broadbent’s speech is in focus “especially given the mixed signals from the BOE that have increased the odds of an August hike,” write analysts at UniCredit Bank
  • His comments will likely “those recently made by the governor Mark Carney, leaving the odds in favor of the BOE remaining on hold throughout the period of Brexit negotiations” and in that case EUR/GBP could break above 0.8880, opening the door for a move towards 0.90, they write
  • A slightly hawkish comment from Broadbent would see “limited and well contained” move higher in sterling. Levels between 0.88 and 0.8750 in EUR/GBP would be “an attractive area to fade any potential sterling rebound.”
• Yields on 10-year gilts rise 4bps to 1.30% after a 5bps decline in the previous two sessions
  • U.K. gilts have handed investors the worst returns among global bonds in the past month, but some analysts at JPMorgan remain optimistic as they think the chance of a BOE hike this year are slim: chart