Excel Currencies Blog

UK economy expected to remain robust as we approach the 6% mark..

This morning saw a host of investment banks show support for GBP near-term. The policy change by the BoE last week was totally overdue, but at least an aggressive change of lanes finally did arrive. With the economy holding up much  better than expected and with inflation still very much sticky, all roads at this point lead to 6% interest rates.

This will mean a higher hiking path compared to the UK's peers and so is being seen as £ positive for now. This has been reflected in the recent Commodity Trading Commission data which shows a bullish surge on the Pound. In fact, trader positions on a stronger GBP stands at the highest position since 2014.  

Goldman Sachs, CIBC, Barclays, ING, OCBC, Scotiabank & MUFG all agree positive sentiment is with Sterling and have shown support for the currency this morning. This doesn't mean we will see £-€1.20 & £-$1.30 mid-market around the corner everyone, as it's easy to find other heavyweight names that think just the opposite to these guys. 

But, it means there is a chance that current levels are no longer elevated to the upside of what the £'s value is. A consolidation period would be welcome to ensure the £-€1.12 & £-$1.20 ranges are a thing of the past and perhaps an increase of 1-2% overall is on the cards by year-end from here for Sterling.