Any indication that BoE is not as hawkish as expected could cause a reversal in GBP gains – Crédit Agricole

The British Pound (GBP) has been the best-performing G10 currency in 2023. Economists at Crédit Agricole discuss how the Bank of England (BoE) meeting could impact the Pound.

There is a significant possibility that the BoE might disappoint

Market participants anticipate that the Monetary Policy Committee (MPC) will raise rates in each of the next five policy meetings until the end of 2023, taking the bank rate to 5.75%, which would be the highest in the developed world. However, the BoE may not meet these exceedingly hawkish market expectations in its policy decision scheduled for Thursday. There is a significant possibility that the BoE might disappoint, leading to investors cashing in on their long GBP positions.

Given the GBP's recent strong performance, any indication that the BoE is not as hawkish as expected could cause a reversal in the currency's gains.

Investors and market participants will closely watch for any hints or changes in the BoE's language that could suggest a more cautious approach to rate hikes. Such a development could impact currency markets and bring a fresh perspective to the GBP's trajectory.

See – BoE Preview: Banks expect 25 bps, door open to further hikes