A muddled message by the Bank of England did not do Sterling any favours last week. Economists at Société Générale expect the GBP to remain under pressure for the time being.

UK Q3 GDP forecast to contract 0.5%

“The explicit lowering of market rate expectations by BoE Governor Bailey is at odds with the US where Fed Chair Powell talked up expectations for the terminal rate. This divergence and growth differentials should hold back a bullish readjustment of the GBPUSD in the short-term.”

“Unless US CPI surprises to the downside this week, investors may decide against cutting Sterling shorts with UK Q3 GDP forecast to contract 0.5%. This will signal the start of the two-year recession.”