BOE: The pound leans bearish over the coming weeks – Goldman Sachs
Analysts at Goldman Sachs back the view for further sterling underperformance, in the face of the Bank of England’s (BOE) monetary policy divergence with its global peers.
Key quotes
"The Bank of England delivered another 25bp hike last week-an underwhelming response to acute inflation pressures-but signaled that it is willing to potentially act more "forcefully" if inflation proves more persistent (which we interpret to be a reference to 50bp hikes in the next couple of meetings).”
"We and the market interpreted last week's policy statement as a slight softening in the "transitory" inflation view. Still, some on the MPC appear to have a high bar for what would qualify as “more persistent" inflation pressures, and the BoE's actions continue to stand out relative to its DM peers. So, we continue to look for further Sterling underperformance ahead, especially as the ECB debates a faster exit with a credit backstop in place, but the risk-reward of Sterling shorts has deteriorated somewhat, in our view.”
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
