GBP: Bullish mood can continue – ING
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GBP: Bullish mood can continue – ING

The Pound Sterling (GBP) strengthened yesterday as the Bank of England sent some hawkish signals while cutting rates by 25bp. The announcement of the UK-US trade deal later in the day added some support to the pound, but that was short-lived, ING's FX analyst Francesco Pesole notes

UK-US trade deal adds support to GBP

"The deal had already been largely priced in, and the implications for the UK economy are not significant. That said, the UK has now signed two trade deals in quick succession (with India and the US), and that is keeping markets hopeful on trade talks with the EU – which would have much more meaningful implications for the UK, and can lend a hand to troubled British finances."

"When it comes to the BoE, the hawkish surprises came both from the vote split and the details in the statement. There were four dissenters to the 25bp decision, two voting for a 50bp reduction and two for a hold. In the hawkish camp were Catherine Mann, a long-time hawk who had (very surprisingly) voted for a 50bp cut earlier this year, and most importantly, Huw Pill, the BoE’s Chief Economist. That resounded more with markets than the two 50bp cut votes, as the statement also seemed to lean on the cautious side. The guidance is unchanged, with further easing steps still set to be 'gradual and careful', and growth forecasts were not revised lower as some had expected."

"The proximity to the 19 May EU-UK summit can keep markets on the bearish side of EUR/GBP. Calmer risk sentiment and positioning imbalances (EUR is more overbought than GBP) should also keep the pair pressured. A test of the big 0.840 support (where 100-day and 200-day moving averages converge) is a tangible possibility in the coming weeks."