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Mar 18 - 08:55 AM

GBP/USD - COMMENT-Fed-BoE Play Pass The Parcel To GBP/USD Music

By Rob Howard  —  Mar 18 - 07:40 AM

March 18 (Reuters) - The risk of a GBP/USD break below 1.30 has risen on the back of the role reversal between the Federal Reserve and Bank of England about who might be more likely to deliver a 50 basis point hike during their current tightening cycles.

BoE expectations have turned less hawkish following Thursday's dovish 25 bps hike to 0.75%, with a Bank Rate of 1.25% now priced for the next-but-one BoE meeting on June 16 versus 1.5% pre-1200 GMT on Thursday, according to the latest Refinitiv estimate based on interest rate futures. BOEWATCH

In contrast, there is a 36% chance of a 50 bps rate increase from the Fed at its next meeting on May 4 (a day before the next BoE rate decision). FEDWATCH

Markets had priced a much higher chance of the BoE springing a 50 bps rate hike surprise this week than the Fed. nL2N2VI1CDnL5N2VK3VOnS0N2OC017

1.30 was Tuesday's 16-month low for GBP/USD.
Bear targets below include 1.2854 (Nov 2020 low).

Related comment: nL2N2VK1E9

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Refinitiv IFR Research/Market Commentary


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