BOE: The Pound is Expected to Fall in the Next Weeks, According to Goldman Sachs.

In light of the Bank of England's (BOE) monetary policy divergence with those of its international peers, Goldman Sachs analysts support the outlook for continued sterling underperformance.

June 22, 2022 - 12:45 PM 244 views

BOE: The Pound is Expected to Fall in the Next Weeks, According to Goldman Sachs.

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© BOE: The Pound is Expected to Fall in the Next Weeks, According to Goldman Sachs.

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In light of the Bank of England's (BOE) monetary policy divergence with those of its international peers, Goldman Sachs analysts support the outlook for continued sterling underperformance.

Important Quotes

"The Bank of England delivered another 25basis points (bps) hike last week—a lacklustre response to acute inflation pressures—but signalled that it is willing to possibly act more "forcefully" if inflation proves to be more resilient (which we perceive to be a benchmark to 50 basis points(bps) hikes in the next couple of sessions)."

"The policy statement from last week was viewed by the market and us as a small easing of the "transitory" inflation perspective. However, some MPC members seem to have a high standard for what constitutes "more persistent" behaviour "Inflationary pressures, as well as the BoE's policies, continue to set it apart from its DM counterparts. So, even though the ECB is considering a quicker exit with a credit backstop in place, we still expect further Sterling underperformance in the future. However, in our opinion, the risk-reward ratio for shorting Sterling has gotten worse.

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