GBP/USD seen at 1.20 and Gilts 0.50%-0.80% – TDS

The FX Strategy team at TD Securities expects GBP/USD to grind lower towards the 1.20 region b year-end.

Key Quotes

“We now see the BoE cutting rates by 50 bps at its August meeting. We see a 30% risk of a move at the July meeting but think the BoE will prefer to wait and assess the actual impact on the data and see where GBP and rates settle”.

“QE will need to wait until the autumn so the BoE can calibrate those amounts to the loss in demand”.

“We expect at least £100 bn in QE to be announced and a further £100 bn is possible beyond that as needed. That will also give further downside to GBPUSD, where we pencil in a low for the currency of 1.20 and a range of 0.50%-0.80% on 10y gilts”.