ANZ on GBP, the bank thinks there are many risks on the near term horizon ...
Gap between PMIs in the UK and the US (or UK and euro area) is at the highest level since the Brexit referendum, and before then, the highest level since the early 2000s
- suggests the UK economy is underperforming compared to its peers
- as such, the current run in sterling doesn't seem entirely justified or self-sustaining
We think the BoE is unlikely to prepare markets for a hike in May
- Carney ... message that a gradual tightening is coming
- fundamentals don't seem strong enough for the Bank to tweak its forecasts higher or upgrade its language yet
- It is more likely, we think, that the Bank will remain in wait-and-see mode, which should cause some pull-back in current market pricing
- we see a risk that the Bank may downgrade its forecasts for inflation
UK-EU negotiations ... red lines drawn by both parties remain conflicting
- Brexit headlines will intensify towards the end of this week... UK and EU press conferences on Friday
- any news that will hint to a delayed transition deal could weigh heavily on sterling
Net
- we remain broadly optimistic around the outlook for sterling
- (but) some of the catalysts underpinning GBP strength over the past weeks - such as the more aggressive repricing of the Bank and better sentiment concerning the EU-UK relationship - are likely to fade for now.
