GBP/USD: The rise would depend entirely on whether the BoE convinces the markets that it can do more – ING

The British pound has been the worst performing G-10 currency in the last 30 days. ING economists analyze the outlook for the GBP.

The persistence of price pressures does not guarantee a rate increase

We are not surprised to see investors remain generally defensive on the Pound ahead of Wednesday’s CPI numbers and Thursday’s BoE announcement. The data has not clearly pointed in the dovish direction, but the BoE communication has (compared to previous expectations), so even evidence of persistent price pressures tomorrow does not guarantee a rise on Thursday.

Our base case remains a rate hike, although a rise in sterling would depend entirely on whether the Bank of England convinces markets it can do more (a similar situation to last week’s ECB meeting ), since the Sonia curve foresees 38 basis points of tightening in total, although the implicit probability of an increase on Thursday is only 80%.