GBP/USD: More sterling gains to come – MUFG

FXStreet reports that economists at MUFG Bank highlight continued positive GBP developments.

“Mobility is already surging before the 21st June decision, suggesting it is not an impediment to the pick-up in activity expected. We track the 3 Apple mobility measures on average and averaged over a 7-day period, and the latest readings show the UK has now surpassed our EZ measure and the US. UK activity is likely surging more than assumed.”

“While the BoE forecast for 2021 is robust at 7.25%, the Q2 GDP assumption of 4.3% QoQ is now looking quite cautious. There have been some clear signs of progress on trade. While the impact of Brexit on EU trade will certainly linger, trade deals to be shortly announced with Australia and Norway plus positive indication of progress on the UK joining CPTPP will reduce the negative sentiment in relation to the Brexit trade impact.” 

“GDP surpassing BoE expectations and a labour market looking tighter than expected will test the BoE’s resolve. The strength of the housing market is also raising concerns with Deputy Governor Ramsden stating the MPC was ‘looking carefully’ at market conditions. Gertjan Vlieghe’s reference under his base-case scenario of a rate increase ‘well into next year’ is ahead of the view in the MPR and is in our view a sign of where the risks lie.”