Friday’s session seemed to signal that some calm has been restored to the British government bond market, favoring a drop in EUR/GBP below the 0.8400 mark, notes Francesco Pesole, FX analyst at ING.
BoE to announce policy on Thursday
“Our short-term fair value model shows a fairly modest risk premium of around 0.6% on EUR/GBP at the moment. As discussed last week, the pound and UK bond markets are unlikely to “The British government faces a repeat of the post-2022 mini-budget crisis, but a gradual upward reset in British government bond yields due to expected higher borrowing may still weigh on the pound down the road.”
“On Thursday, the Bank of England announces its policy and a 25 basis point increase is widely expected. Markets will probably be more interested in hearing what the MPC has to say about last week’s budget. While the Office of Budget Responsibility sees the fiscal measures announced as being both pro-growth and inflationary, our UK economist does not expect them to significantly alter the BoE’s view.”
“For now, Governor Andrew Bailey can focus on the recent drop in services inflation and try to divert attention from the budget and back to the data. That could be interpreted as a dovish signal for the BoE’s rate expectations, and probably There is room to add further easing to the GBP swap curve, which is currently pricing in 32 basis points over the next two meetings. A moderate rebalancing may weigh on the pound this week, but it is also accompanied by some lower yields. long-term UK government bonds, some inflows into sterling markets may offset selling pressure on GBP.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
