Potential Downside Risks for Sterling

Deutsche Bank Cautions that in light of the recent surge in GBP USD, they have opted to capitalise on its pound position against the dollar, citing a potential "dovish surprise" at the upcoming Bank of England (BOE) meeting.

A Bullish Approach

Previously bullish on the pound since the beginning of the year, the financial institution now views the short-term risk-reward ratio for the currency as less attractive.

It notes that much of the positive domestic news for the UK has already been factored into the current price levels.

The perceived dovish risks primarily revolve around rate pricing. While the markets anticipate at least one more rate hike following the recent one, the prospect of a further increase to reach a bank rate of 5.00% remains uncertain. Therefore, if policymakers offer clarification in this regard, it could potentially introduce a dovish sentiment for the pound.

As we approach the BOE meeting, market participants are keenly observing the potential impact of any developments on sterling. Deutsche Bank's cautionary stance reminds us of the shifting dynamics that may influence the currency's performance in the near term.

Stay tuned for our comprehensive coverage of the BOE meeting and its implications for the financial landscape.

A Solution

PathFinder FX can offer you different solutions and experience.

Book a call with Tom to see how our online platform

• Can give you competitive rates.

• Provide visibility of your incoming and outgoing international payments.

• Allows you to set up forward contracts should you wish to mitigate your risk against forex volatility.