- The risks skew negatively for GBP – TDS
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The risks skew negatively for GBP – TDS
The BoE has seen the biggest repricing of terminal rates over the past three months, which sets up an interesting backdrop for the Pound. Economists at TD Securities analyze GBP outlook.
The rub for GBP is that the UK wins the award of stagnant economy recently
We think the risks skew negatively for GBP, as we expect a 25 bps hike and decent round of US data this week.
The rub for GBP is that the UK wins the award for stagnant economy recently. While inflation has eased, growth data trends have suffered the most across all the G10/EM markets we track. The consequence is that the perky GBP has cracked, but we still prefer exposure to crosses, given the correlation between the broad USD and risk.
For the BoE this week, sell GBP/CHF, capturing the potential for a dovish BoE and the limited exposure to broad USD moves.
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