Weaker than expected manufacturing sector-related business activity has been weighing on the GBP. However, we remain of the view that GBP dips should be bought.
First of all, weaker business confidence appears to have been largely driven by intensifying geopolitical tensions, which we do not expect to become a sustainable market driver.
Secondly, the services sector should be taken as a better indication of domestic conditions and therefore any scope of stabilizing price developments. As we expect services sector-related business activity to continue expanding at recent high levels, this should keep investors’ BoE rate expectations supported to the benefit of the currency.
Accordingly we remain of the view that currency dips should be bought, for instance against the CHF and the JPY.
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