GBP leans bearish amid expectations of too much BOE tightening – Morgan Stanley
|Analysts at Morgan Stanley recommend staying short on the British pound, as markets price in too much tightening from the Bank of England (BOE) this year amidst growth risk and surging inflation.
Key quotes
"Slowing growth and uncertainty around the outlook keep the BoE, which delivered a 25bp hike in March, cautious. UK growth is likely to weaken with a sizeable hit to real disposable income as energy prices continue to rise.”
“As such, we think markets are still pricing in too much policy tightening, with another five hikes priced in for this year."
"A cautious BoE, should weigh on UK 2y yield differentials, which puts downward pressure on GBP. We like to express our GBP bearish view via short GBP/NOK, targeting 11.30, as growth and policy differentials widen."
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