GBP/USD: Downside risks as BoE rate hike expectations are too high – Commerzbank
|Since UK inflation rates for April surprised on the upside last week Sterling has been on the up. Economists at Commerzbank note downside risks for the GBP, though.
Rate hikes to the extent as the market is currently expecting seem exaggerated
“It is quite possible that we will continue to see data surprises over the coming weeks and that inflation turns out to be more stubborn than the BoE is currently expecting. As long as this risk remains in place the market will see no reason to change its rate hike expectations.”
“The latest data publications no doubt provide arguments for further rate hikes. For that reason, Sterling will remain supported short-term. Rate hikes to the extent as the market is currently expecting seem exaggerated though as we assume that sooner or later the data will point to falling price pressure and a further weakening of the economy.”
“We therefore see the risk of a correction of the rate expectations and thus downside risks for Sterling.”
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.