In view of Jane Foley, senior FX strategist at Rabobank, the Bank of England clearly does not target the pound as the MPC members generally make every effort to avoid talking about GBP to avoid being accused of currency manipulation.
Key Quotes
“Large movements in the value of an exchange rate will have a significant bearing on the inflation outlook. The Bank will thus be watching the value of GBP very closely and the risks of a sizeable move in the exchange rate on the back of Brexit news is currently likely posing a significant challenge for policy makers.”
“Since the start of this year, GBP has performed relatively well meaning that the MPC are unlikely to repeat this exact message. The relative buoyancy of the pound this year likely reflects the persistent optimism of investors that a hard Brexit will be avoided. That said, the hawkish tone of the BoE has also likely played a part.”
“It is our central expectation that a deal between the UK and the EU will be in place before March 29 and that the UK will be spared a hard Brexit at the 11th hour. On the back of this forecast, we expect EUR/GBP to settle in the 0.85 to 0.86 region on a 3 to 6 month view. Overall, we would expect the pound to drop to around 12% to 14% or so on a hard Brexit which would take cable towards the 1.14 area and EUR/GBP towards parity.”
Share
