Time Horizon Important For The GBP
The fundamental outlook for Sterling remains intact, but some analysts argue that with a lot of the positives already reflected in the price we need to be careful of tactical corrections in the currency going into the BOE.
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The economic recovery in the UK has been going from strength to strength over the past couple of months with the BOE expecting the economy to be back to pre-covid growth levels by the end of the year.
Apart from that, recent CPI data has seen a continued push to the upside, with the most recent CPI print coming in above the BOE’s 2% target. The recent upgrades from the BOE, as well as the steady and positive data points have seen markets expectations increase that the bank will be the next major central bank to move further away from easy policy.
However, the recent virus cases, Dollar strength and political uncertainties have seen quite a divergence between what the rates markets and spot FX market is expecting from the event, which means caution is required.
We’ll go through all of that in this week’s week ahead video.