"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.
