Decisive and coordinated policy action from BoE and Government should provide GBP with support, but the prospect of further EU/UK post-Brexit talks should cap the pound, according to economists at Westpac Institutional Bank.
Key quotes
“The first dose came from an inter-meeting BoE 50bps cut of its core Bank Rate back down to the post-Brexit vote ‘insurance’ low of 0.25% seen in 2016.”
“The second dose came from an expansionary budget that included up to GBP30bn of spending to support public services. Such pressures are unlikely to be restricted to the UK and so the initial impact on GBP has been overshadowed by global asset shifts.”
“The compression of global rates towards zero may cause markets to asses the scale of policy support provided to economies. This could favour GBP.”
“With post-Brexit negotiations next week likely cause some concern, GBP/USD may remain at the lower end of its recent 1.2725-1.3200 range.”
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