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Mar 20 - 09:55 AM

BofA: GBP into Tomorrow's BoE and Positive April Seasonality

By eFXdata  —  Mar 20 - 09:33 AM

Synopsis:

Bank of America forecasts the Bank of England (BoE) to maintain its interest rate stance in the upcoming meeting, with a potential lean towards continued caution regarding inflation and wage trends. Despite minimal expectations for rate cuts, the meeting is unlikely to significantly impact markets. With the UK experiencing modest growth revisions and the global FX market favoring carry trades, the British pound is expected to enjoy seasonal support in April, continuing its strong performance against the USD.

Key Points:

  • BoE Decision: Predicted to keep rates unchanged with a possible inclination towards caution, reflecting on services inflation and wage dynamics.
  • Market Impact: Limited direct impact from the BoE's decision is expected due to minimal rate cut anticipations.
  • GBP Outlook: Supported by favorable carry trades and a benign risk environment, GBP is poised for strength in April, benefiting from seasonal trends.

Conclusion:

The Bank of England's forthcoming policy decision is anticipated to follow a cautious yet steady approach, with minimal adjustments expected. The British pound, having demonstrated resilience and benefiting from positive carry trades, is positioned for continued support in the favorable month of April. Despite recent corrections, the underlying bullish sentiment towards GBP remains intact, underscored by a more optimistic economic outlook for the UK.

Source:
BofA Global Research

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