The Bank of England (BoE) is forecast to hike its key rate by 25 bps to 4.25%. In the view of economists at ING, GBP/USD is set to climb toward 1.25 in the coming days.
BoE to hike
“Markets are now fully pricing in a 25 bps scenario and will therefore look for some indications that the further 40 bps currently embedded in the GBP OIS curve is warranted.”
“The division within the BoE’s MPC may be nothing but exacerbated by the recent market turmoil, the risk is that markets may receive very little guidance on future policy paths.”
“Ultimately, the Pound may rapidly default to being driven by external factors: primarily the banking situation and global risk sentiment. A test of 1.25 in Cable in the coming days is looking quite likely.”