The pound fell 2% against the dollar after the Bank of England raised rates by 75 basis points on Thursday. UBS economists expect GBPUSD approaches 1.10 in the coming months.
The challenge of the British economy casts a cloud over the pound sterling
“The fall in the pound partly reflected the dovish aspects of the monetary policy statement, which indicated that rates could “peak lower than financial markets had pegged”. Also, two of the nine members of the Monetary Policy Committee were in favor of smaller rate hikesone of them wanted 50 basis points and the other wanted 25 basis points.”
“The pound’s vulnerability also reflects the country’s difficult macroeconomic environment. There is a high probability that the UK will enter a recession in the coming quarters while inflation remains high.”
“We believe that GBPUSD is likely to hover around 1.10 in the coming months“.
Source: Fx Street
