GBP: ‘Gotta have faith’ that a Brexit ‘No Deal’ will be avoided to go long - ING
According to Viraj Patel, Research Analyst at ING, ‘Sterling’s post-Brexit fall matters more for inflation than you think’ and it may well be one of the crucial messages the Bank of England signals this week as it looks set to hike rates.
Key Quotes
“Bank officials will need to give the illusion that this is more than a one-and-done policy move to nip their currency-related inflationary concerns in the bud. We expect them to be successful in doing so, with the signal of a ‘gradual’ tightening cycle retaining an element of policy flexibility – while steepening the UK rate curve a bit. Yet, we’re aware that the big picture focus for GBP remains Brexit – and we expect there to be some focus on a parliamentary testimony by Brexit Secretary David Davis on the economic implications of a ‘No Deal’.”
“An optimistic GBP outlook does require having bold faith in politicians to follow the economically rational path of a mutual divorce agreement with a status-quo transitional period until trade talks are over. With the ‘Carney Put’ in place, we are more comfortable in enlisting such faith in politicians and retain a constructive GBP outlook (GBP/$ 1-month target 1.35).”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
