Risks are skewed to the downside for the pound going into the BOE - BNP Paribas

Author: Justin Low | Category: News

BNP Paribas says a lot of positives have already been priced in for the pound

The firm argues that risks are skewed to the downside for sterling ahead of Thursday's BOE meeting, despite expectations of a generally hawkish tone from the central bank.

Adding that a lot of positive news are already baked into the price and hawkish interpretations of the slowdown in QE purchases should be limited, with the BOE opting for a two-step taper process potentially seen as a more dovish action as well.

BNP also says that with investors holding long pound exposure, there is the propensity for positions to be squeezed but argues that any dip would be an opportunity to buy considering the medium-term bullish bias for the pound.

Expanding on that, BNP says that among the key reasons for the bias is the expected inflows into UK domestic equities as the economic recovery gets underway.
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