Recently, the British pound has powered on, reaching new highs close to 1.36. This is based on optimism for a rate hike. It began with the BOE and continued with hawkish tones by a member of the Monetary Policy Committee. What’s next?
Here is their view, courtesy of eFXnews:
Barclays Capital FX Strategy Research comments on GBP direction in the aftermath of last week’s BoE meeting in which the central bank maintained a 7-2 vote in favor of keeping the policy unchanged.
“We maintain conviction in modest GBP appreciation over the forecast horizon and would not fight against GBP strength in the very near term. However, we think risks are skewed to the downside from current levels,†Barclays projects.
Barclays outlines 3 reasons behind this view:
1). â€The degree of conditionality to data developments in the BoE’s statement introduces downside risks to GBP.
2). Political risks around Brexit remain skewed to the downside for GBP, in our view.
3). The recent upside inflation surprise in the US adds to risks of a retracement in cable,†Barclays argues.
