The Bank of England (BoE) raised its rate by 75 basis points but several details tilted in a dovish direction, causing a substantial fall in the pound (-1.5% against the USD). The ING economists expect GBPUSD to retest the 1.10 level.
A very moderate climb
“Although the Bank of England raised interest rates by 75 basis points, it seems that they have changed the political message to the most dovish side possible. The bottom line is that the BoE is closing the door on another 75 basis points, and we expect a 50 basis point hike in December“.
“The fiscal tightening brought by the new UK government may have already had a beneficial effect on the pound, and now the magnitude of the current recession in the UK may become the main driver of the currency. In fact, the downside risks remain quite significant, and next week’s GDP figures will surely be watched very closely: the consensus is currently for a contraction of 0.4% qoq.”
“Risks lean towards a retest of 1.1000 in GBPUSD in the coming dayswith today’s US NFP payrolls possibly adding pressure to the pair.”
Source: Fx Street
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