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Jun 14 - 09:55 AM

ANZ: Downside Risks for GBP Ahead of BoE June Meeting

By eFXdata  —  Jun 14 - 08:30 AM

Synopsis:

ANZ highlights the potential vulnerability of the British pound (GBP) going into the Bank of England (BoE) meeting on June 20. The analysis points to disinflationary pressures and market positioning as key factors influencing the GBP outlook.

Key Points:

  1. Upcoming BoE Meeting:

    • The BoE is scheduled to meet on Thursday, June 20.
    • Previous meetings have shown that the BoE's Monetary Policy Committee (MPC) is open to moving towards easing, even with sticky components in services CPI.
  2. Disinflationary Pressures:

    • PMIs suggest that disinflationary pressures are emerging in the UK economy.
    • This trend supports the possibility of the BoE considering rate cuts in the near term.
  3. Market Positioning:

    • Non-commercial positioning in GBP/USD is approaching maximum size again.
    • An August rate cut is currently underpriced by the market.
  4. Downside Risks:

    • Given the disinflationary pressures and current market positioning, risks are skewed to the downside for the GBP.
    • The GBP may be particularly vulnerable if the BoE signals a dovish outlook or moves towards easing.

Conclusion:

ANZ sees the risks for the GBP as skewed to the downside going into the BoE meeting on June 20. With disinflationary pressures building and market positioning suggesting an overbought GBP/USD, the currency may be vulnerable, especially if the BoE signals or moves towards easing. The potential for an underpriced August rate cut adds to the downside risk for the GBP.

Source:
ANZ Research/Market Commentary

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