BTMU FX Strategy Research has brought forward the timing of the first MPC rate increase from Feb 2018 to Nov 2017.
From an FX perspective, BTMU short-term metrics point to GBPupward momentum being more likely sustained going forward.
“Short-term yield spreads have moved in favour of the pound, unlike for the euro for example. Secondly, our 10-year real yield spread is also turning and moving in favour of a higher GBP/USD. The pound certainly looks over sold versus the euro based on short-term yield spreads. Of course, as has been the case over the last year, the biggest moves for the pound have been Brexit related and hence negotiations need to proceed relatively smoothly for GBP/USD to hold on to recent gains.
We assume modest further gains over the short-term with an end-Q3 forecast of 1.3100,” BTMU projects.
Source: BTMU Research
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