By eFXdata — Apr 22 - 10:45 AM
Societe Generale Research discusses GBP outlook and sees a scope for further move lower as Sterling breaks below 1.30.
"UK money markets price slightly more a further 150bp in rate hikes by the end of the year – 50bp at each of the 6 remaining meetings. If rates do go up by as much as is priced in the rises will be increasingly ineffective in supporting the currency, given that they will be a reaction purely to high inflation, as the economy slows," SocGen notes.
"The labour market may stay strong for a while, but the market consensus forecast for average UK GDP growth in 2022/2023, which has already fallen from a peak near 4% to under 3% now, still looks optimistic. At some point, that will matter more to sterling as the MPC’s fight against inflation. GBP/USD slicing past 1.30 opens the door to a sizeable move, and not only against the dollar, by any stretch of the imagination," SocGen adds.
Société Générale Research/Market Commentary