GBP/USD set to test the May 2020 low near 1.2075 – BBH

FXStreet Insights Team FXStreet

GBP/USD trades above Thursday’s new cycle low near 1.2165. Economists at BBH expect the pair to test the May 2020 low around 1.2075.

Bank of England tightening expectations have cooled

“We look for a test of the May 2020 low near 1.2075. After that, we have to start talking about the March 2020 low near 1.1410.”

“WIRP suggests another 25 bp hike is priced in for the next meeting June 16. Looking ahead, the swaps market is pricing in 125 bp of total tightening over the next 12 months that would see the policy rate peak near 2.25% vs. 2.5% at the start of this week.”

“April CPI data will be reported next Wednesday, with headline expected at a whopping 8.9% YoY vs. 7.0% in March. Therein lies the dilemma for the BoE, which at this point appears unwilling to confront the inflation problem head on as the Fed is trying to do. This is why we remain negative on sterling.”

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FXStreet Insights Team

FXStreet

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