GBP's Path Amidst Soft PMIs and BoE Tightening Expectations

GBP: Short term rates remain the key driver

GBP: Short term rates remain the key driver

Yesterday's price action in EUR/GBP was telling. EUR/GBP briefly dipped under 0.8500 on the soft eurozone PMI releases only to surge to 0.8565 on the soft UK services PMI release. The soft UK data took a large 15bp out of pricing for the Bank of England (BoE) tightening cycle. We still think that the BoE will not deliver on the 60bp of tightening still priced by the markets and that EUR/GBP can later this year move back to the 0.87 area.

The only UK data of note today is the August CBI retail sales numbers and we suspect EUR/GBP continues to trade a 0.8500-0.8550 range, while Cable is quite steady near 1.2700 too.

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Topics

gbp bank of england markets eur/gbp cable retail sales price action short-term rates soft eurozone PMI releases UK services PMI BoE tightening cycle CBI retail sales numbers

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