Credit Agricole CIB Research discusses GBP outlook and maintains a cautious bias on sterling in the near-term.
"The UK rates markets are attaching a c.85% chance to a 75bp rate hike this week [meeting moved to Sept 22 due to the Queen's death] and expect the bank rate to peak at c.4.25% next year. While we think that the MPC would try to live up to and even exceed the market rate hike expectations, we worry that policymakers could remain divided on the need for further aggressive rate hikes from here," CACIB notes.
"Also of interest for investors will be any indications that the BoE may be forced to slow down the pace of reduction of its balance sheet in light of the recently announced government spending plans. In all, while we still see the GBP as oversold and undervalued at current levels, we maintain a cautious outlook on the currency," CACIB adds.
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