GBP/USD is firming up its drive above 1.35 ahead of expected Bank of Enland (BoE) hike on Thursday. Economists at Scotiabank believe that the “Old Lady” will not meet market expectations of further rate hikes, pounding the pound.

Near-term ceiling for the cable at 1.36

“We await the BoE’s announcement tomorrow – where we see a 25bps hike but some pushback against market pricing (GBP downside risk).” 

“Market pricing for the BoE has held steady at a 95-100% chance of a hike tomorrow and a total of five 25bps hikes by end-2023. We think it’s more likely that the bank delivers only 100bps in rate increases this year, which should eventually act as a headwind for the GBP as markets reprice expectations.”

“We see the 1.36 mark as a near-term ceiling for the GBP.”

“It would take a clear sign from the BoE that it is willing to go above its neutral rate for the pound to test 1.38.”