- GBP/USD: Some headwinds for the GBP in the near-term as markets are pricing BoE terminal too high – CIBC
Market news
GBP/USD: Some headwinds for the GBP in the near-term as markets are pricing BoE terminal too high – CIBC
Economists at CIBC Capital Markets discuss GBP/USD outlook.
Recessions risks are overpriced
In the wake of core prices gaining a full percentage point since the start of the year, the market has materially boosted BoE terminal rate assumptions towards 5.50%, stoking renewed recession concerns. However, we expect the terminal rate to top out at 5.00%, as rates in excess of such levels would amplify recession risks.
Early signs of a rollover in food prices, while labour markets and wages appear set to moderate, point towards a graduated reduction in UK terminal rate assumptions in the next few months.
But looking beyond, we don’t expect a recession in the UK. As such, an easing in recession fears combined with a softer USD should support the broad GBP recovery narrative.
GBP/USD – Q3 2023: 1.24 | Q4 2023: 1.27
Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer