Markets expect 50 bps by the Bank of England. Economists at ING analyze how the BoE’s policy announcement could affect the EUR/GBP and GBP/USD pairs.
“The swap market is fully pricing in a 50 bps hike, and we doubt the reaction in Sterling will be meaningful.”
“EUR/GBP may be more impacted by potential surprises from the ECB, while some stabilization or modest recovery by the Dollar may cap GBP/USD and prevent 1.2500 from being tested before year-end.”
“Heading into the New Year, we still see a preponderance of downside risks for GBP/USD as hawkish central banks (above all, the Fed) hiking into a recession point to the underperformance of highly risk-sensitive currencies like the Pound.”