GBP/USD: BoE will not do the pound any favours – TDS
|The Bank of England hiked its Bank Rate by 50 bps to 2.25%. In the opinion of economists at TD Securities, the BoE will not do GBP any favours, reflecting the current macro mix that will invite higher inflation and lower real rates.
The BoE hiked Bank Rate by 50 bps to 2.25%
“The BoE opted for the 50 bps hike. They are inching towards more aggressive hikes, but that probably won't do GBP many favours. For starters, monetary policy tightening has advanced to dovetail with the boost to fiscal spending. In turn, the policy mix requires tighter monetary policy just to keep pace with the fiscal spending. In the short term, that will likely exacerbate inflationary conditions, leading to a drop in real rates, especially relative to the USD.”
“We continue to expect further GBP downside, especially against the USD. GBP/USD HFFV sits near 1.18, though we think the pair will continue to trade with a discount in the months ahead. That leaves us looking to fade near-term rallies ahead of 1.15.”
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.