The Bank of England hiked Bank Rate today by 25 bps which triggered a fairly muted GBP response. TD Securities' bearish medium-term USD view should support GBP regardless of the BoE outlook.

GBP on a lower tier relative to EUR and JPY

“While we expect another hike in May, we don't think it will provide too much upside impetus to GBP.”

“A deeper correction in the USD should support GBP but we still think it underperforms on key crosses.”

“EUR has more upside on the links to China reopening and has seen a nice shift in the current account dynamics linked to the terms of trade reversal. EUR/GBP trades near the midpoint of the 60d range, so we would look to buy dips below 0.88.” 

“Rate compression and a likely BoJ shift should boost the JPY, favoring relative outperformance versus GBP.”

“Regarding GBP/USD, we think the Fed reinforces our medium-term bearish USD outlook, increasing downside risks to our current USD forecasts. That would support GBP, but that theme favors others just a bit more.”