• International Financial Outlook Report – May 2017

    Summary of forecast changes

    • We continue to expect no change to UK Bank Rate over the forecast horizon to mid-2019, with the MPC likely to ‘look through’ the temporary rise in inflation. In the US, we maintain our expectations for two further hikes this year, in June and September. In the Eurozone, we expect the ECB to continue with monthly asset purchases of €60bn for the rest of this year, but the increasingly balanced risks for the growth outlook suggest it will prepare for a winding down of QE in 2018.
    • Our euro forecast is revised higher, with EUR/USD now at 1.12 (up from 1.10) at end-2017 and 1.18 (from 1.13) at end-2018. We have left our forecast for the pound against the US dollar unchanged at 1.30 for end-2017, rising to 1.35 at end-2018. Therefore, our GBP/EUR projection is lower at 1.16 (from 1.18) at end-2017 and 1.14 (from 1.20) at end-2018.
    • Elsewhere, the USD/JPY forecast is unchanged at 108 and 105 for the end of this year and next, respectively. We have nudged down our forecasts for the Australian dollar and Canadian dollar. AUD/USD is now seen at 0.80 (from 0.81 previously) and 0.82 (from 0.83) at end-2017 and end-2018, respectively, while USD/CAD is seen at 1.30 (from 1.26) and 1.25 (from 1.24).
    • We have nudged down our forecasts by 10bps for 10-year US Treasury, UK gilt and German bund yields for end-2017, but they are unchanged at end-2018. Our 10-year gilt yield target is 1.5% at end-2017, rising to 2.2% at end-2018, while US 10-year Treasury yields are seen at 2.5% and 2.9%, respectively.

    Read the full International Financial Outlook Report for May 2017.

    Read the previous International Financial Outlook Report for April 2017.