GBP/USD: Upside potential limited to the 1.42 level – Credit Suisse

Economists at Credit Suisse retain a 0.8400 target in EUR/GBP ahead of this week’s Bank of England meeting. However, they see GBP/USD upside potential limited to 1.4200.

Modest hawkish repricing risks for the BoE

“Markets expect more of the same from chief economist Andy Haldane but also do not expect any other MPC members to change their minds either, and the base rate is expected to remain unchanged at 0.10% alongside an unchanged asset purchase target.” 

“With the impact of the end of the job furlough scheme scheduled for September still unknown, and much of the current high inflation phase seen as transitory by the large majority of the MPC, the odds are high that the BoE will avoid any new messaging, especially as new economic and market forecasts are not due until the August MPC.”

“There are upside risks to the BoE’s current economic projections, and we agree with her view that the BoE will likely hike rates around mid-2022 by 15bp and then by a further 50bp in 2023.” 

“Any comments from the BoE in coming weeks that suggest the end of job furlough may not be so problematic after all could see markets upgrade further 2022 rate hike expectations.” 

“We have stuck firmly to our medium-term 0.8400 target for EUR/GBP in recent months and we continue to do so now. But with EUR/USD under more pressure too now, this likely limits GBP/USD potential to around 1.4200 in the near-term.”