Goldman Sachs expresses confidence in the continuation of Bank of England’s rate hikes and believes it will further bolster the British Pound.
Key Points:
-
Anticipated BoE Rate Increases: Goldman Sachs’ economists predict that the Bank of England (BoE) will raise rates by another 50 basis points in August, based on supportive data. This is expected to provide additional support to the British Pound (GBP).
-
Aligned Inflation and Activity Data: Contrasting with the situation last autumn, both inflation and economic activity data are now indicating an upward trend. This means that the BoE faces less of a dilemma in balancing between rate hikes and supporting economic activity.
-
Skeptical of Currency Weakening Through Aggressive Rate Increases: Goldman Sachs expresses skepticism regarding the notion that aggressive rate increases might weaken the British Pound by affecting growth. The firm believes that as long as the BoE is committed to higher real rates, the GBP will remain supported, even though other domestic assets such as house prices and equities might take a hit.
In conclusion, Goldman Sachs sees a strong case for the Bank of England to continue on its path of rate increases, and predicts that this will be beneficial for the British Pound. The financial institution believes that concerns regarding aggressive rate hikes weakening the currency are unwarranted as long as there is a commitment to higher real rates. This analysis can be crucial for investors and traders keeping an eye on the GBP and UK assets.
For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.
This article was written by Adam Button at www.forexlive.com. Source