GBP/USD: Forward yield spreads suggesting a potential lift for the pound – Westpac

Solid hard data endorsed strong surveys and if affirmed by BoE’s Agents Report and tilt MPC to taper and lift rates in 2022. GBP/USD could well push above 1.40 again, in the opinion of economists at Westpac.

See – GBP/USD: Hot inflation data fuel BoE rate hike expectations, sterling underpinned into year-end – OCBC

PM Johnson's government reshuffle resulted in no changes in key economic positions

“If retail sales are solid and the recent strength in key CBI trends and PMI surveys do not show any ill-effects from the ending of UK’s employment-supporting furlough scheme, then the recent lift in expectations for a clear tapering and rate hike bias for the BoE will most likely be affirmed. That would gain greater force if the Agents’ Report continues to show positive employment and investment intentions.”

“PM Johnson’s Cabinet reshuffle, which aligns the Govt. for an election in 2 to 3 years, is a media event rather than unsettling markets, especially given that Sunak remains as Chancellor and the reshuffle had been well flagged in the media as the summer recess ended.”

“ The shift in BoE expectations has triggered a break higher in rates spreads which should see GBP/USD test the upper end of its recent ranges.”