Risks seen to the downside for the pound in the coming weeks – Crédit Agricole

GBP/USD remains vulnerable around 1.12. Economists at Crédit Agricole keep the bearish bias intact around the British pound. 

Bank of England to disappoint market rate hike expectations

“We think that for the GBP to extend its recent gains, we need to see a further retreat of UK sovereign credit risks.”

“We further continue to see the risks to the downside for the currency in the coming weeks. This is because the announced and future fiscal austerity measures will increase the UK recession risks but dampen some of the inflation pressures given the government’s support for household energy bills.” 

“We think that the BoE will disappoint market rate hike expectations in the coming months. In addition, the UK external imbalances are expected to deteriorate further and add to the pressure on the GBP.”