GBP: Is BoE Defending GBP Credibility? What’s The Trade? – Barclays
The pound is still confused from the quickly-changing stance of Mark Carney, but also of his colleagues. What’s next?
Here is their view, courtesy of eFXnews:
Barclays Capital FX Strategy Research notes that the recent hawkish stance of the BoE following Governor Carney’s speech last week come could likely be an attempt by the central bank to defend the credibility of GBP.
“We had long expected the BoE’s MPC members to support the currency by means of an eventual disagreement on the course of monetary policy amid high inflation forecasts and, in our view, the BoE is largely defending the credibility of GBP as a store of value amid losses both in foreign exchange and in domestic purchasing power.
Strategy-wise, Barclays recommends fading recent GBP strength tactically on the grounds that political uncertainty likely to remains elevated in the near-term.
“However, as political uncertainty still weighs heavily on GBP, we continue to see downside risks as a result in the short run,” Barclays argues.
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