The GBP has been well supported on the back of investors’ rising growth and rate expectations. Given room for BoE policy expectations to stabilise further we anticipate further GBP upside risk in the weeks to come. Improving domestic conditions should make a case for stabilising inflation expectations to the benefit of rates and the currency. This is especially true as it cannot be ruled out that the BoE will consider higher rates earlier than currently assumed. Indeed, central bank member Weale recently stressed that interest rates may have to rise earlier than currently expected.
In terms of data, today’s focus shifts to the Q4 GDP release, which is likely to confirm stable growth conditions.
As a result of the above, we stay short EUR/GBP.
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