GBP flows: BOE June 20 Rate Cut Risks Underestimated

 We are below consensus due to the terrible April retail sales data and labor market softening.  This can produce some reaction, but the market is only attaching a 5% chance to a 25bps BOE rate cut on June 20.  The view is that the BOE will not cut with a general election underway.  However, the BOE MPC are sufficiently mature that we feel it is a close call for a cut on June 20 or a heavy hint of an August cut (only 35% probability).  GBP could react to the BOE on June 20.  The manifestos are also expected this week from the main parties, with Labour likely to be reviewed closely given the opinion polls still point to them winning with a comfortable to large majority.  All the signs remain that Labour will announce targeted expenditure increase that are properly funded and Labour will largely stick to the Conservatives fiscal consolidation plans.  This would not be a surprise for GBP, but will reduce event risk.