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- GBP looks in need of more aggressive rate support – Scotiabank
GBP looks in need of more aggressive rate support – Scotiabank
GBP underperforms after another CPI overshoot. Economist at Scotiabank analyze Sterling outlook.
Focus on BoE
The May data showed headline CPI rising 0.7% in the month (0.5% expected) and accelerating to 8.7% in the year. Core CPI rose to 7.1% in the year and my calculations show the 3m annualized core rate holding above 12%, underscoring the sharp pick up in core prices since the start of the year.
The data should seal a 25 bps hike from the BoE tomorrow, with swaps pricing in a slightly greater chance of 50 bps (32 bps priced in, from 28 bps prior to the data).
The GBP, which slumped close to a cent on the USD around the data, looks in need of more aggressive rate support.
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