GBPUSD daily
Following the Bank of England’s decision to maintain policy rates, Credit Agricole highlights the GBP’s emerging status as a high-yield currency, supported by the potential for future easing.
Key Points:
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BoE Decision and Forward Guidance:
- The BoE kept rates unchanged in September while signaling future gradual easing. Only one member dissented for a 25bp cut, indicating a cautious approach.
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Gilt Holdings Reduction:
- The BoE plans to reduce gilt holdings by GBP 100 billion over the next year, reflecting a commitment to monetary tightening despite potential easing ahead.
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Market Reactions:
- UK rates markets have adjusted easing bets for November and December 2024, suggesting a slightly less dovish stance from the BoE.
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Economic Concerns:
- The BoE’s ability to diverge from the ECB or Fed is questioned, especially if UK GDP data does not show significant improvement. Fiscal austerity plans may also hinder growth.
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GBP Outlook:
- The GBP may remain supported in the near term due to its rate advantage, but it could be vulnerable to profit-taking if upcoming retail sales or fiscal data disappoints.
Conclusion:
While the GBP stands to benefit from its status as a high-yield currency, caution is advised as it may face challenges from economic data and potential profit-taking in the near future.
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