GBP/USD to plunge towards 1.34 amid lofty BoE expectations – Scotiabank

GBP/USD holds modest gains. But economists at Scotiabank expect the cable to slide towards the 1.34 level as the market is too aggressive pricing the next hikes by the Bank of England (BoE).

Governor Bailey is in favour of a measured approach in hiking

“We think markets are set to be disappointed as Governor Bailey and Pill, the bank’s chief economist, are in favour of a more measured approach in hiking.”

“The 2% BoE rate that markets are seeing by end-2022 is also excessive, we think, as it could have too much of a dampening impact on demand-side dynamics.”

“The GBP is at risk of a test of 1.34 soon as markets re-price some of these lofty expectations.”