The pound enjoyed the upbeat UK GDP growth for Q3, that climbed up to 0.4%. Is the BOE set to begin a full tightening cycle that will send Sterling higher? Here are two opinions.
Here is their view, courtesy of eFXnews:
GBP/USD: In A Range N-Term Before Higher; Where To Target? – ING
ING FX Strategy Research expects GBP/USD to trade in a 1.3050-1.3340 in the near-term before moving to 1.35 in one-month.
With the rising nervousness about the direction of the Brexit negotiations, there is a little scope for more persistent GBP strength.
In the US, our economists look for an above-consensus 3Q GDP (2.9% YoY, vs 2.5% consensus) suggesting a gentle downside to GBP/USD purely based on growth dynamics,” ING argues.
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GBP: UK GDP Growth Suggests BoE On A Start Of A Hike Cycle; What’s The Trade? – Nomura
Nomura FX Strategy Research discusses GBP outlook in light of this week’s robust UK GDP growth data.
“Economic growth was reported at 0.4% q-o-q in Q3, better than the BoE expected at the time of its August Inflation Report but still subdued – especially when judged against the backdrop of a rapidly recovering and synchronised global economy.
Typical recoveries have lasted longer (and seen far greater expansions) than the current one, which may suggest that the cycle has longer to run and that the BoE will view its first rate hike in a decade as the start of a cycle, rather than “one and done” – a gradual and limited cycle, admittedly,” Nomura argues.
Strategy-wise, Nomura prefers to trade with conviction that the BoE is on a hiking cycle, recommends maintaining long GBP Vs EUR in options, and a fresh long GBP vs AUD* in spot.