A surprisingly more dovish path for Bank of England (BoE) policy, severe price swings in the face of changing rate expectations and strained relations with the European Union have weighed on the still vulnerable GBP / USD. say Westpac economists, who do not rule out a test of the 1.30 level.
Key statements:
“The BoE’s 7-2 vote to leave rates unchanged reflected more benign projections for inflation. Growth is now forecast to slow through the end of the forecast period. Markets quickly discounted the new information on their prices from rate cuts and reversed the recent narrowing of spreads over US rates. “
“Rising tensions with the EU over the Northern Ireland protocol and fishing rights have added headwinds for GBP / USD. Consequently, the GBP risks sliding towards retracement support in the area. 1.3150-75 or even further decline to threaten 1.30. “
“GBP / USD would need to rebound above 1.3600 to ease the current more negative outlook for the GBP ahead of the MPC boE meeting on December 16.”
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