UK July PMIs are out this week

UK July PMIs are out this week (first survey evidence of Q3 activity) starting with the manufacturing PMI today. It has been a weak spot of late. Much change is not anticipated this time (cons: 51.5, prior 51.4) as export orders have dipped into contraction territory. Thursday is the BoE's "Mega Thursday". The MPC decision, minutes, and Inflation Report will all be published on the same day. 

Although some of the inputs into the new forecasts, such as GBP, point to a lower medium-term profile for inflation, these are expected to be cancelled out by stronger news on wages keeping the 2yr forecast close to the 2% target. 

"We look for three MPC members to have voted for a 25bp hike this time, ahead of an eventual November hike as momentum in wage growth continues," notes RBC Capital Markets.

Markets are still only priced for May 2016, which makes us bullish GBP. CPI inflation remains >1ppt below target so Carney will need to write Osborne a letter.