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Talking Points:

• British Pound seems biased upward on Bank of England Inflation Report

• Aussie Dollar drops as consumer inflation outlook drops to 11-month low

• Yen down, Nikkei higher after dovish comments from BOJ Gov. Kuroda

All eyes are on the Bank of England as traders eagerly look to comb through an updated Quarterly Inflation Report for clues about officials' views on the likely policy implications of June’s referendum on the UK’s continued membership in the European Union.

An ominous tone may be seen as likely to influence voters to opt forstaying within the EU, which may boost the British Pound. Rhetoric suggesting the central bank does not see the poll as a major factor in shaping near-term rate hike chances could produce similarly GBP-supportive conditions.

A significant “Brexit” risk premium is probably priced in at this point. This means the BOE would need to explicitly link a vote to leave the EU with a dovish policy turn to trigger outsized Sterling weakness. Such a scenario seems unlikely in that it risks significantly politicizing the Bank, hurting its credibility.

The Australian Dollar underperformed in overnight trade after a gauge of consumer inflation expectations hit an 11-month low, stoking RBA rate cut speculation. As it stands, traders price in a 22 percent probability of a 25 basis point cut at next month’s meeting.

The Yen declined while Japan’s Nikkei 225 stock index traded higher following dovish comments from Bank of Japan Governor Haruhiko Kuroda. The central bank chief stressed policymakers’ readiness to boost stimulus and warned that tightening may not occur within his tenure.

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