GBP/USD is trading above Thursday’s new cycle low near 1.2165. The BBH economists they expect the pair to test the May 2020 low around 1.2075.
Bank of England tightening expectations have cooled
“We look for a test of the May 2020 low near 1.2075. After that, we have to start talking about the March 2020 low near 1.1410.”
“WIRP suggests another 25bp hike is priced in for the next meeting on June 16th. Looking ahead, the swap market is pricing in 125bps of total adjustment over the next 12 months, which would see the policy rate peak close to 2.25% versus 2.5% earlier this week.”
“CPI data for April is due next Wednesday, with the headline expected to be 8.9% yoy vs. 7.0% in March. Therein lies the dilemma for the BoE, which at the moment seems unwilling to tackle the inflation problem head-on like the Fed is trying to do. That is why we remain negative on sterling.”
Source: Fx Street
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