Pound Sterling rates look priced too close to the US – ING
|Looking at forward curves, it is remarkable that UK interest rates remain priced so close to the US, ING’s FX strategists Chris Turner notes.
UK rates to be priced lower starting in August
“UK interest rates remain priced so close to the US. Both price around 45bp of rate cuts this year and both have a terminal rate for forthcoming easing cycles around the 3.30/3.40% area. Our conviction views this summer is that UK rates will be repriced lower starting with a rate cut in August. And this should lead to a lower Pound Sterling (GBP).”
“We will not hear anything more from the Bank of England (BoE) until after the 4 July general election now. But thereafter, we would be looking for the more dovish members of the seven who voted for unchanged rates last week to make their voices heard.”
“Uncertain developments in the eurozone suggest EUR/GBP may struggle to break back above 0.8490 in the short term. But a cross rate like GBP/NOK could come lower over the next month if both US rates come lower and the BoE doves emerge in July.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.