Credit Agricole: BoE's Carney To 'Talk Up' GBP today

"This week's inflation report will attract considerable attention with investors keen to know how the growing risk of stagflation in the UK (eg, weak growth and soaring inflation) will affect the bank's policy outlook. We suspect that the MPC will revise its inflation projections to the upside while revising its annual growth projections for 2017 down (in part to account for the stronger economic performance since the EU referendum). The projections need not point at imminent stagflation, however. In addition, we suspect that the MPC will want to convey the message that they are still able and ready to ease again if needed. Even so, the Governor will also highlight that any surge in inflation, on the back 'substantial' FX depreciation, can severely limit the bank's ability to respond to future economic shocks. We believe that Carney will use the IR conference to talk up GBP and highlight that the prospect for any future easing will depend upon the future path of the currency. This could help support GBP if only because it will be seen as delaying future BoE easing. Needless to say, this can only be positive for GBP so long as investors do not think that the UK economy needs further stimulus".