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Jun 21 - 06:55 AM

GBP/USD - COMMENT-GBP/USD Drop To 1.15 Could Tee Up Big BoE Hike

By Rob Howard  —  Jun 21 - 04:40 AM

The probability of the Bank of England delivering a forceful 50 basis point interest rate hike in August will increase if GBP/USD falls to 1.15 before then.

On Monday, MPC hawk Catherine Mann said the BoE should raise rates faster than it has so far because sterling's weakness is adding to Britain's inflation pressures. nL8N2Y73EB

BoE chief economist Huw Pill on Tuesday said the central bank needs to take into account the GBP exchange rate when assessing inflation pressure, although he is concerned that using monetary policy to stabilise the GBP exchange rate would distract the BoE from its goals. nL9N2VE02EnL9N2VE02F

GBP/USD was last at 1.15 in March 2020, courtesy of the pandemic.
Last week's 27-month low at 1.1934 came 24 hours before the Federal Reserve raised rates by 75 bps.

There is currently a 73% chance of a half-point hike from the BoE on Aug.
4, according to a Refinitiv measure based on interest rate futures. BOEWATCH

Related comment: nL1N2Y417S

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Source:
Refinitiv IFR Research/Market Commentary

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