GBP: Dovish Wage Developments Lead to Lower Sterling Prices

GBP: Rolling lower

GBP: Rolling lower

As we discussed in yesterday's FX Daily, the market did read the latest wage developments slightly dovishly and re-priced both the Bank of England tightening cycle and sterling lower. It is quite incredible to see the Bank Rate now priced just above 5.50% next February. This terminal rate had been priced close to 6.50% just a few months ago.

If we are right with our call for an ECB rate hike tomorrow, EUR/GBP could edge up towards the 0.8670 area. And given that we like a continued strong dollar in the short term, expect GBP/USD to press the 200-day moving average at 1.2430. Recall that based on speculative positioning data, both the euro and sterling look the most vulnerable to further dollar strength.

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Topics

british pound gbp/usd gbp bank of england forex trading monetary policy boe interest rates eur/gbp exchange rates economic outlook FX markets central bank policy inflation expectations speculative positioning Wage Developments

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