GBP: Sell into strength as further gains should be capped - Westpac
|Tim Riddell, Research Analyst at Westpac, highlights that the dissent from Kristin Forbes (calling for a rate hike) and less dovish MPC minutes have opened potential for a withdrawal of BoE’s post-Brexit-vote accommodation as GBP gained at least temporary support.
Key Quotes
“This highlights importance of confidence and inflation into the next MPC meeting (inflation data and MPC on 11th Apr).”
“However, retail surveys, including the BoE’s Agents’ report, had been flagging into Thu’s sales release. Within the Agents’ report, investment intentions, a key indicator of post Brexit confidence, have been lifting into March, from zero immediately after the vote. If maintained post the triggering of Article 50, this also could alter the MPC’s stance.”
“The shift in MPC bias and firmer inflation data triggered the cutting of GBP shorts, notably against the softer USD. GBP is back in the middle of its perceived ranges (1.20-1.28 vs USD and 0.84-0.88 vs EUR). Sell into strength as further gains should be capped as Brexit negotiations begin.”
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