The BoE’s policy update triggered a modest initial sell-off for the Pound. Economists at MUFG Bank analyze GBP outlook.
GBP to weaken further
The updated policy messages from the Fed and BoE were both similar in our view signalling it was more likely that no further hikes would be required but not going as far as completely ruling it out. The developments support our outlook for the Pound to weaken further.
The UK rate market is currently pricing in around 55 bps of cuts by the end of next year. We still expect the BoE to deliver more cuts next year than currently priced.