Any indication that BoE is not as hawkish as expected could cause a reversal in GBP gains – Crédit Agricole

FXStreet Insights Team FXStreet

The British Pound (GBP) has been the best-performing G10 currency in 2023. Economists at Crédit Agricole discuss how the Bank of England (BoE) meeting could impact the Pound.

There is a significant possibility that the BoE might disappoint

Market participants anticipate that the Monetary Policy Committee (MPC) will raise rates in each of the next five policy meetings until the end of 2023, taking the bank rate to 5.75%, which would be the highest in the developed world. However, the BoE may not meet these exceedingly hawkish market expectations in its policy decision scheduled for Thursday. There is a significant possibility that the BoE might disappoint, leading to investors cashing in on their long GBP positions.

Given the GBP's recent strong performance, any indication that the BoE is not as hawkish as expected could cause a reversal in the currency's gains.

Investors and market participants will closely watch for any hints or changes in the BoE's language that could suggest a more cautious approach to rate hikes. Such a development could impact currency markets and bring a fresh perspective to the GBP's trajectory.

See – BoE Preview: Banks expect 25 bps, door open to further hikes

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD revisits 1.3530; Dollar pushes harder

GBP/USD adds to the weekly correction and recedes toward the 1.3530 zone on Friday. Indeed, Cable faces increasing selling pressure on the back of extra gains in the Greenback, particularly fuelled by Chair Warsh’s speech at the Jackson Hole Symposium and the US NFP Annual Revision (-79K).

EUR/USD breaches below 1.1600, multi-day lows

EUR/USD now accelerates its decline and retreats to seven-day troughs in the sub-1.1600 region at the end of the week. The pair’s pullback comes on the back of the strong rebound in the US Dollar after Chair Warsh delivered a hawkish message in Jackson Hole, while the US NFP Annual Revision came in at -79K.

Gold seems vulnerable above $4,450 as Fed hike bets, Iran risks support USD

Gold recovers slightly from a one-and-a-half-week low, touched during the Asian session on Monday, though any meaningful recovery seems elusive. Fed Chair Kevin Warsh’s Jackson Hole speech was perceived as hawkish, raising expectations for a September rate hike. Adding to this, fresh US strikes on Iran keep the geopolitical risk premium in play, which acts as a tailwind for the safe-haven US Dollar and should cap the bullion.

Week ahead: RBNZ and BoC decide on rates ahead of all-important US NFP

The US dollar staged a modest recovery this week, perhaps as traders decided to cover some of their short positions amid slightly stickier or in-line US PCE inflation numbers for July, confounding expectations of softer prints amid the softness revealed in the CPI data for the month.

CFTC Report: CAD short covering leads; Gold buying surges

The week in one sentence: speculative positioning shifted more constructively in the week to August 25. CAD short covering led the move, followed by a broad reduction in EUR shorts and renewed Gold buying. GBP and VIX positioning also improved, while JPY positioning deteriorated and WTI flows diverged from weaker prices.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.