Markets are likely expecting too much tightening from the BoE this year, eliminating any GBP upside in the next few quarters, in the view of economists at CIBC Capital Markets.
“The bank looks set to extend the run of policy tightening to ten straight BoE gatherings; remember, they began the cycle in December 2021. However, we anticipate the current 102 bps of hikes priced for 2023, the market is pricing a terminal rate of almost 4.50%, remains too aggressive.”
“With further substantive public sector strikes scheduled for February broad macro activity and overseas confidence in UK assets risks being tested.”
“Q1 2023: 1.21 | Q2 2023: 1.24 (GBP/USD)”
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