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- GBP to suffer in the first quarter – MUFG
GBP to suffer in the first quarter – MUFG
FXStreet reports that economists at MUFG Bank now expect the Bank of England (BoE) to cut rates into negative territory at its next meeting on February 4. GBP will therefore under-perform this year.
“The national lockdown announced on January 4 will ensure a double-dip recession. MUFG forecasts -3.8% GDP in Q4 and -2.7% in Q1 2021. Assuming the current lockdown serves to alleviate capacity pressures on hospitals and vaccination roll-outs accelerate sharply, the hit to the economy in Q4 and Q1 can reverse quickly.”
“The additional hit to GDP from this latest more infectious COVID-19 wave will we believe result in a rate cut from the BoE in February. We now expect the BoE to lower the key policy rate into negative territory in February based on the increased severity of covid. GBP underperformed in 2020 and we expect that to continue in the first quarter. Assuming successful roll-outs of vaccines, GBP can then recover from Q2 onwards.”
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