BoE's hesitant stance to pummel the Pound – Commerzbank
The BoE's stance seems too hesitant, which is likely to weigh on the Pound in the coming quarters, economists at Commerzbank report.
GBP weakness will probably continue next year as well
The door remains open for further rate hikes, but the BoE is likely to hope that the upcoming data releases will give it room to pause. The financial markets apparently do not share the BoE's optimistic view. The terminal rate is now seen at 5.5%. This seems excessive in view of the BoE's hesitant stance.
The market will probably have to scale back its interest rate expectations, which is why we are sticking to our forecast that the Pound will weaken against the EUR in the coming months. After all, in contrast to the BoE, the ECB appears much more determined in its statements, which should support the EUR.
GBP weakness will probably continue next year as well, as the BoE is likely to cut its key rate in view of the weak economy and somewhat lower inflation.
Source: Commerzbank Research
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