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- GBP/USD to sink towards 1.28 on combination of hawkish Fed and cautious BoE – Scotiabank
GBP/USD to sink towards 1.28 on combination of hawkish Fed and cautious BoE – Scotiabank
GBP/USD drifts higher ahead of the Federal Reserve's all-important interest rate decision while on Thursday, the Bank of England will hold its March monetary policy meeting. Economists at Scotiabank expect a hawkish Fed and a cautious BoE, which should drag the cable down to 1.28.
BoE to deliver a more apprehensive hike than the Fed
“A 25bps hike by the Fed will be matched by the BoE tomorrow but the outlook for the remainder of the year is clearly tilted in the USD’s favour as the BoE may only deliver as much as an additional 75bps by end-2022 compared to up to 175bps more from the Fed.”
“The balance of economic risks will also see the BoE deliver a more apprehensive hike than the Fed, with the UK economy (household spending in particular) more susceptible to the impact of higher energy and food prices resulting from the war in Ukraine.”
“The GBP could aim for a test of 1.28 over the next few days/weeks on the combination of a hawkish Fed and a cautious BoE.”
See – Fed Preview: Forecasts from 14 major banks, raising rates but with a huge asterisk related to the war
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