GBP at Crossroads: BoE Governor Andrew Bailey's Upcoming Address

GBP: Look out for BoE Governor Andrew Bailey at 3:15 pm CET

GBP: Look out for BoE Governor Andrew Bailey at 3:15 pm CET

Sterling is coming under pressure against the strong dollar and marginally outperforming the pressured euro. High wage growth looks to be the primary reason for the market retaining expectations of a further 57bp of Bank of England (BoE) tightening in this cycle – making pivotal next Wednesday's release of the average earnings figures for July. Our base case is one more 25bp hike from the Bank on 21 September and then a prolonged pause.

The manufacturing slump in the eurozone and these high energy prices suggest EUR/GBP can trade at the lower end of that 0.8500-0.8600 range into that BoE rate meeting on 21 September. GBP/USD looks more vulnerable to a firm test of 1.2500 psychological support.

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Topics

gbp/usd gbp bank of england monetary policy interest rates eur/gbp exchange rates sterling economic outlook andrew bailey high wage growth average earnings