FxWirePro: Pound’s respite likely to be short lived

A line of hawkish comments and actions from the Bank of England (BoE) policymakers have provided support to the declining pound over the political uncertainties of a governing minority government. Earlier this month BoE monetary policy report caught pound bears off guard as three members of the nine-member policy-making board voted to hike interest rates by 25 basis points.  The pound rose from a low around 1.264 to 1.28 on the policy. However, it resumed its decline as BoE government in his speech to Mansion House indicated that according to him, now is not the time to hike rates. The pound declined to 1.259 on the remarks. Nevertheless, it recovered lost grounds as BoE’s chief economist who correctly predicted that the central bank would have to cuts rates, while most of his colleagues were calling the next move to be a hike, turned out a hawk, this time around. The pound jumped and currently trading at 1.273 against the dollar.

However, we suspect that this respite for the pound is likely to be a short-lived one and pound would soon return to its declining mode thanks to the fallout from political uncertainties and would continue lower towards our previously stipulated target around $1.23 area.