The pound shot up on quite explicit hints of a rate hike from the BOE. Will they really move in November? Here are three opinions about the next moves for the pound against the dollar and the euro:
Here is their view, courtesy of eFXnews:
GBP: ‘Bumping Along The Bottom’ Still Sums It Up’; What’s Next – SocGen
Societe Generale Cross Asset Strategy Research argues that ‘bumping along the bottom’ still sums up GBP’s key trading theme even if weeks like the last one show what a bump can look like.
“From here, we see far more chance of making a new high in EUR/GBP and a test of parity at some point, than a break below the lows in GBP/USD.
1.25-1.40 probably captures the GBP/USD range for the next year (or longer).
And EUR/GBP 0.85-1.0 may well capture the vast bulk of trading in that cross through to the end of 2018, too,” SocGen argues.
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GBP: EUR/GBP Parity Preachers Took Another Beating; What’s The Trade? – Nordea
Nordea FX Strategy Research notes that the Bank of England ‘BoE firmed last week its stance on inflation and communicated that inflation will likely breach 3% in October, which could warrant some policy tightening within the coming months.
“Given this change of stance it has become harder to believe in upside surprises to Bank of England’s view on inflation and hence also to the current market pricing of Bank of England.
A hike is fully priced for early 2018, while one more hike is also priced before year-end 2018. What if BoE only delivers a one of hike to scale back the stimulus to pre-Brexit levels? Then markets will be disappointed.
At these lower levels for EUR/GBP, we see less value in a long GBP position,” Nordea argues.
GBP: Sterling Stirs; EUR/GBP Shouldn’t Be Shaken For Long – CIBC
CIBC FX Strategy Research notes that GBP was given a boost this week from higher than expected inflation figures and a more hawkish tone from the Bank of England.
However, CIBC warns of extrapolating that appreciation of GBP in particular against the EUR.
“Most of the increase in UK inflation, even ex-food and energy, appears to be linked to import inflation thanks to the prior weakening of the currency… In contrast, services inflation has risen more than ex-food/energy in Europe. That, combined with previous false-starts by the BoE, still have us believing the ECB will reduce stimulus (taper QE) before the MPC hikes rates.
That should see EURGBP rise again before year-end,” CIBC argues.
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