GBP's Strong Start: Outpacing G10 Currencies Amid Elevated Risk Sentiment

GBP: Starting on the right foot

GBP: Starting on the right foot

The pound has had a good start to the week, outpacing other G10 currencies: EUR/GBP was pressing the 0.8600 support yesterday. Interestingly, this was not driven by a rebound in the Bank of England rate expectations (peak rate still seen around 5.70-5.75% in January): it appeared, instead, a mirror of supported sentiment in FX, and the pound showing its ever-increasing sensitivity to risk.

There will be very little on the domestic side for GBP until Friday when GDP figures are released. Expect the pound’s beta-to-risk sentiment to remain elevated for now: in the longer run, we still think markets are overestimating BoE tightening, will have to scale down expectations and EUR/GBP can climb back to 0.87-0.88

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Topics

gbp bank of england fx eur/gbp risk Support sentiment expectations rate expectations G10 Currencies BoE tightening climb week GDP figures good start domestic side beta-to-risk sentiment 0.87-0.88.

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