Pound Slides as Market Reacts Dovishly to Wage Developments

Pound Slides as Market Reacts Dovishly to Wage Developments

GBP

Rolling lower As we discussed in yesterday's FX Daily, the market did read the latest wage developments slightly dovishly and re-priced both the Bank of England tightening cycle and sterling lower. It is quite incredible to see the Bank Rate now priced just above 5.50% next February.

This terminal rate had been priced close to 6.50% just a few months ago. If we are right with our call for an ECB rate hike tomorrow, EUR/GBP could edge up towards the 0.8670 area. And given that we like a continued strong dollar in the short term, expect GBP/USD to press the 200-day moving average at 1.2430. Recall that based on speculative positioning data, both the euro and sterling look the most vulnerable to further dollar strength.

Chris Turner

 

 

Pound Slides as Market Reacts Dovishly to Wage Developments

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