The pound jumped on the upbeat CPI numbers. Will this push the Bank of England to sound a more hawkish tone? Or is this a selling opportunity? Here are a few opinions:
Here is their view, courtesy of eFXnews:
GBP/USD: Rebounding From Oversold Levels Ahead of BoE policy; What’s Next? – BTMU
BTMU FX Strategy Research notes that GBP has rebounded over the last week from heavily oversold levels recorded during August which has lifted cable back to within touching distance of the 1.3267- high recorded back in early August prior to the BoE’s last policy meeting.
“The more dovish than expected outcome from that meeting helped trigger a material pound sell-off in August alongside building concerns over slowing growth in the UK. On this front there have recently been some more encouraging signals over the health of the UK economy which is helping the pound to rebound.,” BTMU adds.
BTMU expects the BoE to reiterate this week that the market is underestimating the scale of rate hikes likely in the coming years although they will likely stop short of signalling a rate hike is imminent this year.
“Another 7-2 vote to remain on hold is expected, although there is a risk of more votes in favour of a hike…Overall, the developments should encourage the pound to rebound further,” BTMU argues.
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GBP/USD: In A Consolidative Phase Ahead Of BoE; Where To Target? – ING
ING FX Strategy Research notes that after a dismal August, GBP/USD looks to be entering a consolidative phase ahead of the Sep BoE policy meeting.
“We believe that both a softer UK economic outlook and domestic political risks are now adequately priced in and only an escalation in either would result in further idiosyncratic GBP downside.
While BoE officials may state that they are not targeting a specific exchange rate level, we suspect the trade-weighted GBP index around the 74 level is in a territory that will warrant greater attention from policymakers. This may provide a backstop to any meaningful GBP-selling theme in markets,”
With the dollar also plagued by US and global politics, we look for GBP/$ to remain anchored around the 1.30 level in the near-term,” ING argues.
GBP/USD: No Change From BoE This Week; S/T Upside Risk On Position-Squaring – Credit Agricole
Credit Agricole CIB FX Strategy Research sees little scope for surprises when it comes to this week’s BoE monetary policy announcement.
“We believe there is little scope of changing central bank rate expectations. After all the BoE seems to continue to link its policy stance to Brexit-related uncertainty.
All of the above means that the GBP is likely to continue trading within this year’s trading range for longer. Nevertheless short-term upside risks persist, especially as speculative oriented investors continue to run a short position,” CACIB argues.
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