At first sight, the headlines stemming from this week’s Bank of England (BoE) meeting could bring mixed messages for GBP. As the market is likely coming to terms with diminishing expectations that the MPC could project a more confident tone, economists at Rabobank do not expect the pound to enjoy considerable gains following the rate decision.
USD to remain well supported in the month ahead
“Given our expectation that the USD is likely to remain on the front foot in the coming months, we are becoming less confident that the pound can achieve our long held target of EUR/GBP 0.84 by year-end. In turn, our three-month GBP/USD 1.39 forecast may prove out of reach for the pound.”
“Despite the wave of hawkish speculation that was triggered by the sharp increase in August CPI inflation release (to 3.2% YoY), we remain reluctant to forecast an increase in the Bank’s policy rate until 2023. As this realisation trickles through the market, GBP could struggle into 2022.”
“In August the Bank’s guidance stated that ‘some modest tightening of monetary policy over the forecast period is likely to be necessary’. We expect that the appointment of Huw Pill as the Bank’s new Chief Economist means that there will be a majority in favour of this guidance this month. While it is likely that GBP could find initial support on such a headline, we would not construe such news as hawkish on its own.”
“Without some strong evidence of a shift towards a hawkish tone from the MPC, we would expect any initial GBP gains following the BoE meeting to lose steam.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.