The pound got a temporary lift from the BOE’s hawkishness but remains vulnerable. What’s next?
Here is their view, courtesy of eFXnews:
BTMU Research discusses GBP/USD outlook and explains how the 2 key drivers of pound performance (Brexit & BoE ) are closely linked.
“The BoE has clearly laid out that their outlook for the UK economy and monetary policy is based on the assumption of a smooth Brexit adjustment. If a Brexit transitional agreement is not reached in the coming months, the BoE would be less likely to follow through on their plans to raise rates in May, although Governor Carney did not go as far as to completely rule out a hike in that scenario,” BTMU argues.
…We still believe that securing a transition deal is the most likely outcome, although the risk of a renewed period of pound weakness would increase if the UK government drags its heels in the coming weeks and months. It poses the main potential risk to our stronger pound outlook which rests on the assumption of securing a timely transition deal,” BTMU adds.
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