GBP/USD: Further BoE hikes are unlikely to prove beneficial to the pound – HSBC
The Bank of England (BoE) delivered a dovish 50 bps hike, as widely expected and the GBP weakened. An inverted curve amid increasingly worrying signs about future growth points to further GBP underperformance, in the view of economists at HSBC.
GBP to weaken against the USD over the short to medium term
“Markets have priced in BoE hikes. This is still the case, with 100bp priced into the rates market for the remaining three meetings this year. The BoE would, at best, meet market expectations for hikes, with a higher chance of under-delivering than over-delivering, thereby weighing on the GBP.”
“The inversion of the UK yield curve suggests markets are worried about a recession and see this tightening cycle as short-lived, making it harder for the GBP to sustain gains on the near-term hikes that are priced in.”
“We still believe that the GBP continues to face both cyclical and structural challenges and the balance of risks remains to the downside through the rest of 2022 and into next year.”
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FXStreet Insights Team
FXStreet
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