The pound is a bit confused with the talk coming out from the Bank of England. What’s next?
Here is their view, courtesy of eFXnews:
BTMU FX Strategy Research notes that the BoE appears likely to be the next G10 central bank to begin raising interest rates which should offer more support for GBP heading into year end.
“We continue to believe that maintaining emergency policy settings is no longer required. The UK economy is still holding up better than feared following the Brexit vote as evident by the release yesterday of the latest UK labour market report.
Employment growth expanded robustly by 175k in the three months to the end of May, and unemployment fell sharply by 64k lowering the unemployment rate to a new cyclical low of 4.5%. The ongoing resilience of the labour market should help to dampen the negative hit to consumer spending from higher inflation. Towards the end of last year, the consensus expectation amongst UK economists tracked by Bloomberg was for the unemployment rate to have drifted higher to just over 5% by now,” BTMU adds.
“Overall, it supports our forecast for cable to break above key resistance at the 1.3000-level which has held over the last couple of months,” BTMU argues.
BTMU targets GBP/USD above 1.32 in Q3 heading towards 1.35 by year-end.
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