GBP might come under depreciation pressure if if Bailey were to sound cautious – Commerzbank

Is Bank of England Governor Andrew Bailey acting as a brake for Sterling? Antje Praefcke, FX Analyst at Commerzbank, believes that the GBP could come under downside pressure again.

Effects of Brexit on the UK have not disappeared

“Will Bailey put a brake on Sterling’s rise? I think that is possible, depending on his comments. If the British economy were to hold up better than feared, it would be easier for the BoE to continue its rate hike cycle as it would have to take less consideration for economic developments. In addition, there is now relief about an agreement between the EU and UK on the Northern Ireland protocol. However, I am cautious as far as the current Sterling optimism is concerned.”

“The agreement about border regulations between the Republic of Ireland and Northern Ireland does not mean that the notable effects of Brexit on the United Kingdom have suddenly disappeared.”

“It is questionable whether the BoE will fulfill market expectations in connection with the key rate hike. That means if Bailey were to sound cautious today as regards the BoE’s future rate cycle, Sterling might come under depreciation pressure once again.”