GBP: Big winner of the week - BBH
|According to analysts at BBH, Sterling is the big winner of the week as the BOE's hawkish forward guidance sent sterling sharply higher yesterday and it is building on those gains today, reaching $1.3450.
Key Quotes
“Today, similarly hawkish comments from BOE’s Vlieghe have helped sterling. Even news of a potential terrorist incident in the London underground earlier today did nothing to deter sterling. Cable had finished last week near $1.32 and had finished last month near $1.2930. The implied yield on the December short-sterling futures contract rose 13 bp on the week through yesterday, while the yield on the 10-year Gilt rose 18 bp.”
“While sterling gained around 1.7% against the dollar (@~$1.3425), the euro slid about 2.6% against it (@~GBP0.8880). The prospect that the BOE raises rates while the ECB announces an extension of its purchases, which given the sequencing that has been outlined means that the UK could be a year ahead of the ECB in raising rates, caught many participants wrong-footed.”
“Given the importance the MPC placed on high frequency data, sterling is likely be particularly sensitive to the data flow in the coming weeks. Interpolating from the OIS, the market appears to be pricing in a greater chance that the BOE hikes this year (~64%) than the Fed (Bloomberg ~47%; our own calculation suggests that a little less than a 40% chance has been discounted).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.