GBPCHF SELL
**Fundamental view :** the British pound could be the main victim of a strengthening euro, "as the Bank of England (BoE) is closer to the end of its tightening cycle than the Fed and the U.K.'s large current account deficit makes the pound vulnerable in a global slowdown.”
Pound Slumps as BoE Forecasts Recession for UK
The Pound (GBP) was initially boosted by stronger-than-expected GDP figures on Monday. Persistent expectations of a recession kept GBP’s upward movement limited, however.
Mixed jobs data on Tuesday largely weighed on the Pound. A rise in unemployment undermined a bump in wage growth. This, along with a drop in inflation on Wednesday, saw markets pare back their BoE rate hike bets.
Thursday’s interest rate decision from the central bank pulled Sterling lower. Dovish forward guidance alongside the **50bps interest rate hike** dented confidence in the Pound.
Finally on Friday, an unexpected slump in November’s retail sales deepened GBP’s losses.
****"We therefore think short GBP/CHF is the best relative value expression of policy divergence essentially long EUR/GBP with a “BTP hedge” - Goldman Sachs.****
UK bonds slumped on speculation a wave of extra supply will drive down prices as the Bank of England prepares to push on selling its sovereign holdings at the start of the new year.
Yields on 10-year gilts jumped as much as 16 basis points to 3.48% on Monday, the highest since early November
**Central Banks view :**
Actual is **3.5%** but more to come. The BoE, which is battling double-digit inflation that has unleashed a cost-of-living crisis that is pushing the economy deeper into recession, **[has raised rates](reuters.com/markets/europe/bank-england-raises-rates-35-expects-more-rises-come-2022-12-15/)** by a combined **325 bps in 2022** alone to their highest since late 2008.
UK rates began rising in December 2021, making the BoE the first of the world's major central banks to kick off a monetary policy-tightening cycle.
This is to a financial advice, just my own analysis.
Pound Slumps as BoE Forecasts Recession for UK
The Pound (GBP) was initially boosted by stronger-than-expected GDP figures on Monday. Persistent expectations of a recession kept GBP’s upward movement limited, however.
Mixed jobs data on Tuesday largely weighed on the Pound. A rise in unemployment undermined a bump in wage growth. This, along with a drop in inflation on Wednesday, saw markets pare back their BoE rate hike bets.
Thursday’s interest rate decision from the central bank pulled Sterling lower. Dovish forward guidance alongside the **50bps interest rate hike** dented confidence in the Pound.
Finally on Friday, an unexpected slump in November’s retail sales deepened GBP’s losses.
****"We therefore think short GBP/CHF is the best relative value expression of policy divergence essentially long EUR/GBP with a “BTP hedge” - Goldman Sachs.****
UK bonds slumped on speculation a wave of extra supply will drive down prices as the Bank of England prepares to push on selling its sovereign holdings at the start of the new year.
Yields on 10-year gilts jumped as much as 16 basis points to 3.48% on Monday, the highest since early November
**Central Banks view :**
Actual is **3.5%** but more to come. The BoE, which is battling double-digit inflation that has unleashed a cost-of-living crisis that is pushing the economy deeper into recession, **[has raised rates](reuters.com/markets/europe/bank-england-raises-rates-35-expects-more-rises-come-2022-12-15/)** by a combined **325 bps in 2022** alone to their highest since late 2008.
UK rates began rising in December 2021, making the BoE the first of the world's major central banks to kick off a monetary policy-tightening cycle.
This is to a financial advice, just my own analysis.
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