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Pound could struggle as markets expect too much from BoE – CIBC

In the view of CIBC Capital Markets economists, it is likely that markets expect excessive tightening from the Bank of England this year, which would limit any rise in sterling in coming quarters.

Foreign confidence in UK assets is tested

The central bank seems willing to extend the tightening streak of monetary policy to ten consecutive BoE meetings. Remember, they started the cycle in December 2021. However, we anticipate that the current 102 basis point hike forecast for 2023, to which the market attributes a terminal rate of almost 4.50%, remains too aggressive.”

“With new substantial public sector strikes expected in February, broad macroeconomic activity and foreign confidence in UK assets are at risk of being put to the test.”

“GBP/USD: First quarter of 2023: 1.21 | Second quarter of 2023: 1.24

Source: Fx Street

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