June 14, 2024

GBP/USD: Not enough good news for an uptrend

The GBPUSD is likely to come under downward pressure for the foreseeable future

GBPUSD fell after the Bank of England announced a slightly more dovish than expected. Given the economic divergence between the UK and the US, sterling is likely to remain under downward pressure, according to HSBC economists.

The basic message is doves

“While the Bank of England agreed to raise the Federal Reserve by 75 basis points, there was a clear difference as to where interest rates might peak in the future. The BoE indicated that while further rate hikes were needed, It will ultimately mean that the peak will be lower than what the financial markets were priced at.” This is in direct contrast to the US Federal Reserve, which has observed that even if the pace of interest rate hikes slows, interest rates will likely need to be raised. Overall, this is very worrying news for the UK economy and the British pound.”

“Given this continued cyclical divergence between the US and UK economies and interest rate profiles, we see that GBPUSD is trending lower until the end of 2022.

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