GBP/USD: Potential to breach 1.2475 for a flush to 1.21 – Westpac

Sharply business and consumer surveys and retail sales suggest guidance for more measured hiking from the Bank of England (BoE). Subsequently, the GBP/USD pair could nosedive to the 1.21 level, economists at Westpac report.

Crunch lower in consumer confidence and retail sales to temper BoE’s hiking cycle

“Survey data ahead of next week’s BoE meeting has underscored UK cost-of-living crisis hit. CBI’s Business Optimism fell to -34 (-9 in Jan, 2021 peak of +38) and Reported Retail Sales fell to -35 (printed +28 in Jan, peak of 60 in Aug 2021).”

“MPC will receive updated forecasts in their Monetary Policy Review, views from internal agents on regional businesses and regular Decision Maker data. Weakening demand is likely to feature and further dampen BoE’s hiking path.”

“GBP/USD still has potential to breach 1.2475-00 for a flush to 1.2100. Such downside pressure would be reduced by a close above 1.2850.”