Bank of England’s Deputy Governor Broadbent, representing the middle ground of MPC, does not appear to join the more hawkish camp marginally weighing on the near-term outlook of the GBP, in the view of economists at HSBC. They continue to expect GBP/USD to move lower over the medium to long-term, amid weaker post-Brexit UK growth.
See – GBP/USD needs a hawkish BoE to jump above 1.40 – ING
BoE Deputy Governor Broadbent seems to distance himself from the more hawkish camp
“The GBP may face some marginal downside following BoE Deputy Governor Ben Broadbent’s speech on 22 July, looking at mismatches in the economy. Mr. Broadbent appears to be distancing himself from the more hawkish camp within the BoE that has emerged in recent weeks.”
“Rates market pricing is already looking for rate hikes to begin in Q2 next year, as are our economists. However, the GBP appears to have moved even further in anticipating UK outperformance. This pushback against any near-term tightening, although modest, may still cause some froth to come out of the GBP.”
“Besides the monetary policy prospects, any emergence of downside risks would also hit the GBP. Those risks could be more visible as the UK government’s support schemes (e.g. VAT and stamp duty cuts) roll off in the months ahead.”
“We continue to see GBP/USD moving lower over the medium-term. Brexit costs could also add to the weakening in potential growth and the broader fall in the GBP’s long-term fair value.”
