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- GBP/USD could retest multi-decade low in the coming months – RBC Economics
GBP/USD could retest multi-decade low in the coming months – RBC Economics
The new UK government’s fiscal plan prompted a sharp sell-off in Gilts and sterling. In the view of economists at RBC Economics, cable could retest its multi-decade low.
Bank of England can still send a message by ratcheting up to a 75 bps hike in November
“Sterling is up from its multi-decade low against the US dollar but we think that level could be re-tested in the coming months. Government energy support will help households but won’t fix the UK’s current account and budget deficits, and some currency adjustment will be needed to attract capital inflows.”
“We think the nearly 6% terminal rate now priced into the market (including moves of at least 100 bps at each of the remaining two meetings this year) is too aggressive.”
“We think the BoE can still send a message by ratcheting up to a 75 bps hike in November before reverting to a 50 bps increase in December. We’ve lifted our terminal Bank Rate forecast to 3.75% from 3% previously.
“While the BoE still plans to begin active QT at the end of October, we think that move could be delayed once again.”
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