GBP: Finding Support Ahead of Bank of England Meeting

GBP: Staying supported into the BoE meeting

We are entering a few days of calm in the UK calendar after a slew of key data releases. Yesterday’s GDP data endorsed the recent re-rating of the UK’s growth outlook but hardly mattered for the Bank of England as much as the inflationary signals sent from the jobs and wage growth figures earlier this week.

 

Bank of England rate expectations were marginally scaled back after the Fed meeting, but still imply five 25bp rate increases from current levels before the end of the year. It’s important to note how the higher gilt rates are by themselves starting to have their tightening effect on the economy. Mortgage market distress is the most direct example, with major lenders hiking rates and some pulling mortgage offers following the recent repricing of tightening expectations.

 

It is, still, too early to factor that – or any implications for the housing market – into sterling, which will probably continue to find support into next week’s CPI and Bank of England meeting. EUR/GBP could move closer to the 0.8500 key support after today’s ECB decision.