Analyst Aila Mihr at Danske Bank assessed the week ahead for the Sterling.
Key Quotes
“Both Brexit and the Bank of England (BoE) will steer GBP this week”.
“The UK government’s EU withdrawal bill is being debated in the House of Lords today. Political uncertainty in the UK remains a negative for GBP as Prime Minister Theresa May still struggles to find common ground in parliament on important Brexit questions”.
“Moreover, we expect the BoE to stay on hold and to maintain a neutral stance, signalling that the next rate hike still depends on data. Given inflation is slightly lower and the unemployment rate was slightly higher in May than projected, the probability of a rate hike as soon as August has declined slightly. Market pricing of a 50% probability of a hike in August seems fair at this point, but could decline further if the BoE does not indicate that an August hike still is an option”.
“Strategically, we are still bearish EUR/GBP in the medium-long term and would consider selling the cross on rallies above 0.885″.
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