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- GBP/USD to advance nicely behind still dovish Fed and higher US inflation – MUFG
GBP/USD to advance nicely behind still dovish Fed and higher US inflation – MUFG
FXStreet reports that economists at MUFG Bank maintain a bullish GBP/USD stance.
“Higher inflation is only US dollar positive if it prompts the Fed to bring forward monetary tightening plans and lifts US yields. But those initial hopes have been dampened for now by the dovish response from Fed officials in recent days. Overall, the comments reinforce the Fed’s dovish message that it remains too soon to even think about tapering QE at the current juncture. The combination of still loose Fed policy and higher US inflation leaves the US dollar vulnerable to further weakness in the near-term.”
“The pound has shown little reaction to the UK government’s recent concern over the spread of the new Indian COVID-19 variant in the UK. For now market participants remain optimistic that the UK economy will continue to rebound robustly this year by around 7%.
“Our bullish outlook for the pound is based on the assumption that the UK economy will bounce back strongly, so we will need to monitor the latest COVID-19 developments closely as they potentially pose downside risks.”
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