The Bank of England (BoE ) is caught between a rock and a hard place. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes GBP outlook ahead of the Interest Rate Decision.
GBP has benefited from aggressive BoE tightening. Is that set to change?
The BoE is expected to hike by 75 bps by the August meeting, and two-thirds of the market thinks we will get 25 bps today, with 50 bps more by August.
So far, rate expectations have been the main driver of EUR/GBP and on that basis, a 50 bps hike would see GBP rally. But the inflation/growth trade-off is getting worse and worse and at some point, rate hikes ought to be bad for Sterling rather than good. Has that point arrived?
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