GBP requires a May BoE rate hike to move higher? - ING

In view of Viraj Patel, Foreign Exchange Strategist at ING, GBP not necessarily requires a May BoE rate hike to move higher.

Key Quotes

“For currencies, we continue to believe that it is the overall level of policy tightening priced into markets that will matter more in 2018 and this is certainly true for GBP crosses – which exhibit the greatest sensitivity to relative interest rate differentials across the 2-5 year part of the curve. This means that positive surprises in the UK economic cycle and Brexit progress – both of which will affect the size and extent of the BoE's normalisation cycle – matters more for GBP than the actual timing of Bank rate hikes over the coming months.”

“We see the ~75 bps (3 hikes) worth of implied BoE tightening priced into the 2-year part of the UK rate curve as being conservative and think that there is scope for some further upside in the event of any ‘good’ UK news (data of Brexit transition) over the coming months.”