British Pound: BoE repricing risk weighs on Sterling – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad argues that United Kingdom (UK) July Gross Domestic Product (GDP), expected flat month-on-month, is unlikely to alter Bank of England (BoE) expectations.
The Bank of England's (BoE) upcoming repricing of risk is weighing on the British Pound (GBP), according to Brown Brothers Harriman’s (BBH) analyst Elias Haddad. The UK's July Gross Domestic Product (GDP), projected to be flat month-over-month, is unlikely to alter BoE expectations. The swaps curve implies a 75 basis points of tightening to 4.50%, which Haddad considers overly aggressive and potentially exposes GBP to a dovish BoE repricing due to factors such as a negative output gap, a policy rate above the midpoint of the BoE's neutral range, and prospects for tighter fiscal policy.
The UK Chancellor, John Healey, has pledged to address uncertainty through a fiscal buffer in the upcoming Budget, likely involving tax hikes and spending cuts to reduce higher borrowing costs, which have already halved the government’s fiscal headroom to around £12 billion.
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