GBP/USD to fall another two or three cents on a dovish BoE – Scotiabank

GBP/USD has dropped under 1.25. Economists at Scotiabank expect the cable to lose another two or three cents if next week’s Bank of England (BoE) policy decision is dovish.

BoE to signal a much narrower path for hikes than markets are anticipating

“Sterling one-week risk reversals show the largest downside risk for the GBP over the following week since the initial days of the Russian invasion of Ukraine.”

“A BoE rate hold cannot be ruled out – though it is far from being our base case. The BoE will likely signal a much narrower path for hikes than markets are anticipating, which presents the main GBP downside risk.”

“The pound may still hold around 1.25 over the coming days, but a dovish BoE and weak macro figures over the coming weeks could see the GBP fall another two or three cents; with the broad dollar tone an important unknown.”