GBP: Sterling's Subdued Reaction Post BoE Rate Hike

GBP: Sterling has not moved much since BoE

The sterling trade-weighted index is only marginally weaker since the Bank of England 'only' hiked by 25bp last Thursday. Market interest rates are slightly lower, but investors have not given up pricing two further 25bp hikes by early next year. At present, we look for one more hike to 5.50% in the Bank Rate (probably at the September meeting) before the BoE is prepared to go into a formal pause. This all points to a range-bound sterling over the next couple of months, but we retain an upside bias in EUR/GBP into year-end.

On the UK calendar, this week will be BoE Chief Economist, Huw Pill, speaking at 1815CET today and then not much data until Friday's release of 2Q GDP numbers. For Cable, we see 1.2590/2620 as important support and what should be the lower boundary of this week's range.