Economists at Rabobank have significant doubts over market expectations that the Bank of England (BoE) is likely to hike rates at an aggressive pace this year. Therefore, they expect the GBP/USD to dive below the 1.30 level by mid-year.
The BoE will struggle to tighten policy further this year
“On the assumption that the government does proceed with the announced hike in National Insurance tax in April, we see a risk that the market will unwind some of its assumption on BoE rates and this could leave the pound vulnerable in the spring and early summer.”
“Given our view that the USD will be buoyed as Fed tightened commences, we see risk that cable could dip below the 1.30 level in the middle of the year.”