GBP/USD: Upside would entirely depend on whether the BoE will convince markets they can do more – ING

FXStreet Insights Team FXStreet

The Pound has been the worst-performing G10 currency in the past 30 days. Economists at ING analyze GBP outlook.

Evidence of lingering price pressures does not guarantee a hike

We are not surprised to see investors staying broadly defensive in FX ahead of Wednesday’s CPI figures and Thursday’s BoE announcement. The data has not pointed clearly in the dovish direction, but BoE communication has (compared to previous expectations), so even evidence of lingering price pressures tomorrow does not guarantee a hike on Thursday.

Our base case remains a rate hike, although the upside for Sterling would entirely depend on whether the BoE will convince markets they can do more (a similar situation to last week’s ECB meeting) since the Sonia curve prices in 38 bps of tightening in total, even if they attach only an 80% implied probability of a hike on Thursday.

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FXStreet Insights Team

FXStreet

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EUR/USD flirts with weekly lows near 1.1770

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GBP/USD makes a U-turn, challenges 1.3500

GBP/USD rapidly leaves behind Wednesday’s strong advance, putting the 1.3500 support to the test on Thursday. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold sticks to the bid bias, flirts with $5,200

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