At 19:00 Beijing time on August 4, Beijing time, the Bank of England will announce the interest rate resolution and meeting minutes. Then at 19:30, Bank of England Governor Bailey held a monetary policy press conference. The market previously predicted that the Bank of England would raise interest rates by 50 basis points this time. However, if the bank only raises interest rates by 25 basis points, it may become the biggest downside risk for the pound.
Barclays London analyst Marek Raczko said: "If the Bank of England raises a 50 basis point rate, it may trigger a small conditioned rebound in the pound, and a 25 basis point rate hike should trigger a larger selling."
Barclays expects the Bank of England to raise a 50 basis point rate, which is consistent with the market consensus. However, Latzko warned: "Any rebound in pound should be short-lived or will reverse quickly, as we expect the latest Bank of England forecasts to show the possibility of stagflation in the economy." He also said that the UK's economic growth expectations may be revised downward, coupled with an upward correction of inflation expectations, will pose risks to a 150 basis point rate hike by the end of the year.
Barclays expects the Bank of England to raise only another 25 basis points in September and keep the final interest rate at 2%.
Facts will prove that this will be much lower than existing market expectations and pose a significant downside risk to the pound.
Latzko added: "Any Bank of England's reference to the risk of stagflation or moderate forward guidance on future interest rate hikes should put pressure on the pound."
However, Goldman Sachs strategists have a more positive view on the pound's outlook, especially against the euro. They expect the Bank of England to raise interest rates by 50 basis points this Thursday to break the "more gradual and balanced approach" so far this year. Since the beginning of this year, the Bank of England has been inclined to raise interest rates by 25 basis points.
BOC's interest rate path expectations for the next three years
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Pandel said: "In general, given the more negative outlook for the euro, we think there are fewer reasons for the pound to perform poorly."
GBP against the US dollar daily chart
This article is derived from Jinshi data
