Sterling was able to stand up well against USD and EUR over the past weeks. You-Na Park-Heger, FX Analyst at Commerzbank, expects the GBP to correct lower following the Bank of England (BoE) meeting.

Rate expectations support Sterling ahead of BoE meeting

“An important positive driver is likely to have been market rate expectations. The market is now expecting at least two further rate hikes by the BoE.”

“It is almost certain that the BoE will hike its key rate by a further 25 bps to 4.5% this Thursday; it seems just an aside. What will be much more interesting will be how the individual members of the monetary policy committee will vote and what they have to say about recent economic data, as the market is likely to hope for indications on the future course of its monetary policy.”

“As the BoE has been quite hesitant and cautious as regards the fight against inflation it is difficult to believe that it will surprise with a hawkish stance on Thursday. I, therefore, see a certain potential for disappointment and thus the risk of a downside correction in Sterling as the market’s rate expectations seem quite ambitious. However, I am happy to be proven wrong.”