HSBC: Here is why risk-reward around this week’s BOE may not be encouraging for GBP bulls

HSBC lays out its perspective on the potential movements of the GBP in relation to the Bank of England’s (BoE) upcoming decisions:

Key Takeaways:

  1. Expected Rate Hike: HSBC’s primary assumption is that the BoE will increase the policy rate by 50 basis points on 3 August. The market’s current expectation is a 37 basis point increase.

  2. Transient GBP Upsurge: If HSBC’s 50 basis point forecast holds true, they anticipate a quick, reactive GBP purchase surge. However, they emphasize that any such GBP increase would be temporary.

  3. Alternate Rate Hike Scenario: There is a substantial likelihood, according to HSBC, that the BoE will opt for a smaller rate hike of 25 basis points. In this scenario, the GBP would likely experience an immediate decline.

  4. Unfavorable Risk-Reward: Given the scenarios and their associated potential outcomes, HSBC believes the risk-reward ratio surrounding the BoE meeting does not offer much incentive for those bullish on GBP.


HSBC sees a challenging environment for GBP enthusiasts ahead of the BoE meeting. While there’s potential for short-term gains if the BoE implements a 50bp rate hike, the benefits are expected to be fleeting. Moreover, the possibility of a smaller rate hike of 25bp would

probably lead to an immediate GBP drop, further complicating the risk-reward landscape for GBP bulls. GBP/USD was last at 1.2837.

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This article was written by Adam Button at Source