GBP/USD is moving below 1.23. The Bank of England (BoE) prioritizing growth over containing inflation suggests GBP downside, compounded by political risks, including a potential trade spat with the EU, economists at CIBC Capital Markets report.
BoE still hiking but risks undershooting expectations
“Sliding consumer sentiment and spending, as real earnings head lower, will help squeeze demand-side inflationary pressures out of the system. Building macro headwinds suggest that the BoE will not be as aggressive as the market discounts. We expect a protracted policy pause post once rates reach 1.75% in September.”
“As the growth versus inflation trade-off remains challenging, expect the bank to prioritize growth. This favors GBP downside, especially as ongoing political risks, including a potential trade spat with the EU, remains real.”