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GBP: Dovish MPC Voices and Aggressive Expectations in Focus

GBP: Dovish MPC Voices and Aggressive Expectations in Focus
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  1. GBP: No pushback against aggressive expectations

    GBP: No pushback against aggressive expectations

    Sintra is an important event for sterling as well. While tomorrow’s speech by Bank of England Governor Andrew Bailey is the most awaited event, today’s speech is by the two most dovish voices in the MPC: Silvana Tenreyro and Swati Dhingra. The former will be replaced in the committee by Megan Greene on 5 July and her remarks should have reduced market impact, while any hawkish comments by Dhingra may be read as a de-facto endorsement of the market’s aggressive tightening expectations.

    The Sonia curve is pricing in a 6.15-6.20% peak rate as of this morning around the turn of the year, and keeping the option of a 50bp hike in August very much on the table (44bp priced in). Data may argue against such aggressive action down the road, but the majority of Bank of England officials look unlikely to vehemently push back against tightening expectations for now. EUR/GBP does not have huge downside room, but a rebound to 0.88 will likely be very gradual.


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