GBP/USD is currently trading around 1.2675 levels, and economists at OCBC Bank are examining the Cable’s outlook in anticipation of the upcoming Bank of England (BoE) meeting on Thursday.
Resilient UK Economic Data: The UK’s economic data has shown resilience, providing ongoing support for the GBP. Despite uncertainties, the Services PMI remains in expansionary territory, indicating a positive trend. Additionally, business optimism and consumer confidence have been on the rise. Public sector net borrowing (excluding banking groups) also reported figures lower than expectations. These robust economic indicators contribute to the overall positive outlook for the GBP.
BoE Meeting Expectations: Markets are currently pricing in a 56% probability of a 25 basis points cut at the May Monetary Policy Committee (MPC) meeting, compared to less than 50% probability a week ago. The key focus will be on any hints from the BoE MPC that suggest an earlier rate cut or a dovish stance. Such signals could dampen the bullish sentiment for GBP. However, as long as BoE officials’ remarks do not sound overly dovish, OCBC Bank believes that any pullback could present an attractive opportunity for GBP bulls to re-enter the market.
The overall analysis from OCBC Bank suggests that the GBP’s strength is underpinned by resilient economic data in the UK. While there is a heightened probability of a rate cut in the future, the extent to which the BoE signals a dovish tilt will be crucial in determining the immediate market reaction. As long as the economic fundamentals remain positive, GBP bulls may find the potential pullback as an opportune entry point.