USD decline will push all pairs up, including GBP, but likely to lag behind – TDS

The Bank of England (BoE) left policy rates unchanged by a vote of 6 to 3. The Pound extends its gains after the “Old Lady” maintained a hawkish tone in the statement. TD Securities economists analyze the outlook for the British pound.

Relative interest rate differentials may support the GBP against the currencies of the more dovish G10 central banks.

The Bank of England kept rates unchanged, as expected, but with a hawkish tone, maintaining language around a restrictive bias. The statement reflects a longer rise along with concerns about service sector inflation and wage growth. This is supporting the Pound, especially as it contrasts with the Fed’s dovish stance. Relative interest rate differentials may support the GBP against the currencies of the more dovish G10 central banks.

The decline in the USD will lift all pairs, including the GBP, but we expect it to lag behind its emerging counterparts and the JPY.

Source: Fx Street

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