Barclays: positioning for the Bank of England to stay on hold this year, while the European Central Bank continues to raise interest rates.

Barclays strategists recommend positioning for a narrowing of the interest rate differential between the Bank of England and the European Central Bank in December. They expect the Bank of England's rate hikes this year to be smaller than the European Central Bank's. Fixed income strategists including Moyeen Islam and Rohan Khanna wrote in a report on Thursday, "If the US and Iran resume negotiations and energy prices fall, we believe that the market will lower expectations for rate hikes by the Bank of England faster than for the European Central Bank, because the Bank of England's language on economic growth and labor market risks is more cautious." Money markets currently expect the Bank of England to raise rates by a total of 37 basis points by the end of December, compared to 41 basis points for the European Central Bank. Barclays economists anticipate that the European Central Bank will raise rates once more, while the Bank of England will keep rates unchanged.