Pound/dollar is still trading at the same wide range between 1.3030 to 1.3320, but leans towards the downside. The dust has settled from the rate hike and the focus returns to the Brexit talks. Here are two opinions:
Here is their view, courtesy of eFXnews:
GBP: BoE’s Hike Just A ‘One-Off’; Brexit Talks Back As Key Driver – SEB
SEB FX Strategy Research discusses GBP outlook, arguing that last week’s BoE kike was a ‘one-off hike’ that will most likely not be followed by further hikes until after the withdrawal from the EU in 2019.
“Therefore, from a GBP perspective, monetary policy is probably off the table for now. Instead we have to refocus on Brexit talks for any hints about where the GBP will move,” SEB argues.
“We expect the GBP to weaken near-term before recovering in 2018. Our forecast for the EUR/GBP exchange rate is 0.92 by the end of 2017..After that we expect the GBP to recover to 0.88, or potentially more, by the end of next year as the Brexit risk premium slowly declines on more constructive and successful negotiations of the British withdrawal,” SEB projects.
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GBP: Focus Shifts Back To Brexit Talks; GBP Volatility Set To Rise – ANZ
ANZ FX Strategy Research discusses its GBP outlook noticing that after last week’s BoE policy meeting, the focus is now squarely on the ongoing Brexit talks, expecting GBP volatility to increase significantly over the coming weeks as a result.
“The Bank of England has delivered its first hike alongside a message suggesting that further hikes will be highly contingent on the evolution of growth and are some way off. As such, focus will shift back to domestic politics, with a number of key events likely to drive a rise in volatility over the coming weeks,”ANZ notes.
“Whether the EU and the UK will be capable of finding a compromise that will be political viable for both remains highly uncertain,” ANZ argues.
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