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GBP Into BoE: Any Bounce A Selling Opportunity – BofA

The Bank of England is about to lay out its new policy and the pound is slightly lower. What’s next for the pound? Here is the view from Bank of America  Merrill Lynch:

Here is their view, courtesy of eFXnews:

We expect the BoE to cut Bank Rate on Thursday. They have nothing to gain by waiting: better to get ahead of the issue. –  We look for 40bp cut, but see a good chance of only 25bp: Carney has said he is concerned about taking rates “too low”.

We remain bearish GBP and would sell any bounce.

Our concerns for GBP are two-fold: the macroeconomic impact as data for the full  postReferendum period emerge and the constraints placed on the currency by virtue of the UK’s sizeable current account deficit. Financing of that deficit, which was under close scrutiny headed into the Referendum, will now be front and center for investors. We believe the deficit will be increasingly exposed as the volatile macro and political backdrop deters foreign investment decisions (short and long  term) into the UK.  In our view, a  rate cut should come as no surprise,  but even a more conservative 25bp rate cut will not  likely  provide any relief for the pound and we would use any bounce as an opportunity to sell into.

We reiterate our long July MPC dated Sonia on expectations of a cut.

GBP Brexit Special BOE meeting

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.