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100bp of BoE cuts to come, leaves GBP “asymmetric risk to the downside than to the upside”

A note from RBC on the Bank of England and sterling, says that apart from the BoE outlook the currency could drop on fiscal risks regardless. In summary:

BOE could cut by 50 basis points in both 2024 and 2025, leaving GBP with still one of the highest rates in the G10

But risk for GBP comes from government fiscal policy:

the constrained fiscal backdrop not leaving much space for flexibilityany deterioration in fiscal policy credibility would leave sterling vulnerable GBP faces more “asymmetric risk to the downside than to the upside”

Forecasts EUR/GBP to 0.91 by Q4 of 2025

This article was written by Eamonn Sheridan at www.forexlive.com.

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