We believe the Bank of England (BoE) took a step in the direction of an August rate cut last week, even though core policy communication did not change meaningfully, FX Strategist at ING Francesco Pesole notes.
GBP looks more likely to display weakness
“Markets remain undecided on an August move (14bp priced in) and in our view, are also still too conservative on the total easing this year with 47bp versus our call for 75bp. Our dovish BoE view means a bearish call on the Pound Sterling (GBP), this summer. We could also see some negative spillover on GBP from the UK election.”
“However, political uncertainty currently weighs more on the Euro (EUR) than on the GBP, and that’s why we think a re-appreciation in EUR/GBP beyond 0.8500 has likely been delayed. We see wide upside room for the pair once the EU political noise has settled due to monetary policy convergence.”
“GBP looks more likely to display weakness against the US Dollar (USD) in the near term, and we expect a move to below 1.25 in Cable in July. This week’s calendar is very quiet in the UK data-wise, and there are no BoE speakers scheduled for now.”
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Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
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Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
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Eurozone PMI sounds the alarm about growth once more
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