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- GBP/USD: Doubts over Boe hiking rates four times this year to pummel the pound – MUFG
GBP/USD: Doubts over Boe hiking rates four times this year to pummel the pound – MUFG
The latest UK retail sales figures were disappointing. But some perspective is required. Some of this fall is undoubtedly linked to Omicron. Economists at MUFG Bank still expect the Bank of England (BoE) to hike rates in February but the aggressive pricing of four rate hikes in 2022 may end pounding the pound.
A fragile UK consumer
“The December Retail Sales report has just been released in the UK and the 3.7% drop MoM in overall sales was much larger than expected. The data followed GfK Consumer Confidence earlier today, which showed the index dropping from -15 to -19, the lowest since February 2021.”
“Of course, the emergence of Omicron is the obvious explanation and the markets will likely ignore this given the speed in which Omicron is passing as a disruptive factor for the economy.”
“We don’t think this data places any doubt over a February rate hike by the BoE but it should place some doubt over the pricing of four rate hikes this year. At some stage, we see an adjustment that would result in some GBP underperformance.”
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