GBPUSD set to hold above the 1.10 level – BMO

GBPUSD fell after the BoE’s ‘dovish hike’. Nonetheless, economists at the Bank of Montreal expect the pair to hold above the 1.10 level.

Bank of England gave a divided policy decision

“The BoE actually moved boldly, raising its Bank rate 75 bps to 3.00%. Yes, the hawks are finally in the majority with seven (7) opting for 75 bps. The breakdown of the vote was surprising on two fronts: 1) We didn't expect four policymakers to join the three hawks, and 2) We didn't expect the dovish Silvana Tenreyo to shift from 50 bps to 25 (she felt that the economy was already in recession). Given this dissent, this is not a truly hawkish hike.”

“This is not the last we've seen from the BoE. We look for another 50 bps in December, then 25 bps in February, to 3.75%, with all moves being dependent on the data, and the fiscal update. Obviously.”

“We are cautiously optimistic that the 1.10 level in GBPUSD will hold, but a more aggressive-than-expected Fed is a downside risk to that call.”


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