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GBP: Latest Market News

MUFG Research maintains a bearish and short exposure on GBP/USD targeting a move towards 1.0450.

MUFG Research maintains a bearish and short exposure on GBP/USD targeting a move towards 1.0450.

"The UK rate market is expecting the BoE to deliver a larger 125bps or 150bps hike at their next policy meeting on 3rd November, and then to keep raising rates to a peak next year of closer to 5.75% which would be around 100bps higher than expected for the Fed. At the same time, the pound is still vulnerable to the ongoing tightening in global financial conditions given the UK runs a sizeable current account deficit. The ONS revealed at the end of last week that the UK’s underlying current account deficit when one strips out precious metals averaged around 5.7% of GDP during the first half of this year," MUFG notes. 

"In these circumstances, we are happy to fade the current rebound and continue to look for cable to head lower again heading into year-end," MUFG adds. 

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BoE Officials comments about interest rate

BoE's Broadbent says he thinks conditions for a rate rise have been met, but need to focus on medium term

BoE's Ramsden says necessary but not sufficient condition for a rate rise have been met

BoE's Bailey says he thinks minimum conditions for a rate rise have been met, but not sufficient for one

BoE's Tenreyro says she does not think guidance conditions for a rate rise have been met

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BoE's Bailey says persistence of COVID are pushing inflation higher -> GBP Going UP

BoE's Bailey says persistence of COVID are pushing inflation higher -> GBP Going UP

BoE's Bailey says persistence of COVID means there has not been expected rebalancing of demand between goods and services, pushing inflation higher than expected

  • Semiconductor shortage has led to shortage of new cars and pushing up second than car prices as well in UK.
  • Higher than anticipated inflation underlines persistence of COVID.
  • Overall economic impact of COVID in UK has attenuated.
  • Seeing some short-term levelling off of recovery.
  • Do not think inflation will be persistent.
  • Think it is unlikely commodity prices will continue to rise.
  • Expect supply bottlenecks to sort themselves out.
  • Large concern is getting labour market vacancies filled.
  • End of furlough scheme should help fill vaccines.
  • He has a bit more concern regarding persistence of labour market pressures.
  • Risks on both sides to inflation returning to target over medium term.
  • Market curve does point to some increase in interest rates.

GBP Going UP 20 pips on news reaction

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