The fundamental outlook for Sterling remains intact, but some analysts argue that with a lot of the positives already reflected in the price, we need to be careful of tactical corrections ahead of the next BOE meeting.
The economic recovery in the UK has been going from strength-to-strength over the past couple of months, with the BOE expecting the economy to be back to pre-covid growth levels by the end of the year.
Apart from that, recent CPI data has seen a continued push to the upside, with the most recent CPI print coming in above the BOE’s 2% target. Due to the recent upgrades from the BOE – as well as the steady and positive data points – the markets expect that the BOE will be the next central bank to move away from easy policy.
However, the recent virus cases, Dollar strength and political uncertainties have seen quite a divergence between what the rates markets and spot FX market is expecting from the meeting, which means caution is required.
We’ll explore this in detail in this week’s video.