No sustainable GBP recovery in sight – Commerzbank

On Thursday, GBP/USD grinds lower. Economists at Commerzbank expect the pair to stay offered.

Bank of England’s fight against inflation is being undermined

“Without Downing Street back-paddling I find it difficult to imagine how sterling should recover on a sustainable basis. Comments by the Business Secretary that the central bank was to blame for the recent collapse of sterling rather than the government as it had been too slow to hike interest rates, don’t provide much reason for optimism in this respect. The same applies to comments by Chancellor of the Exchequer Kwasi Kwarteng, who sees potential market turmoil after the end of the BoE's emergency purchase program as the responsibility of the central bank.”

“This does not bode well for the British currency as long as the market questions the sustainability of the government’s plans the gilt markets are likely to remain under pressure with the BoE having to clear up the mess. That in turn means that the central bank’s fight against inflation is being undermined, which then points towards a weaker currency.”