Sterling has been out of the market’s focus over recent months. Economists at ING analyze how the GBP could react to the Bank of England meeting. 

GBP/USD can hold above these 1.25 levels

“Regarding the event risk of the BoE meeting, the key issue will be there is a sharp correction in the pricing of further BoE tightening later this year. On balance, we doubt the pushback will be there (yet), suggesting that Sterling does not have to fall too far, if at all.”

“With downside risks to the Dollar still present, it looks like GBP/USD can hold above these 1.25 levels and perhaps push onto the 1.2650/2750 area. Given what should be a building Dollar bear trend this year, we suspect any intra-day sell-off on any remarks being read as a ‘pause’ would be limited to the 1.2350/2450 area.” 

“Our baseline assumes GBP/USD ends the year near 1.28/30, and EUR/GBP gravitates back to the 0.89 area as the ECB out-hikes the BoE.”