British Pound: Weaker GBP may help revive inflows - BNY

Geoff Yu, from BNY, argues that the current uncertainty surrounding the Bank of England's tightening plans and currency fluctuations make it difficult for foreign investors to confidently pour money into UK assets. He believes that expectations of hawkish policies from the BoE are overblown and that a weaker British Pound, coupled with solid fiscal credibility and peak real yields, could be the key to rejuvenating cross-border demand.

The reporter echoes this sentiment, suggesting that current expectations of further interest rate hikes from the BoE may be excessive and that one more hike might not be needed. They also note that until the rate differentials between the BoE, Fed, and ECB become clear, cross-border interest will remain subdued. The strength of the GBP is also a factor, as cross-border investors must navigate foreign exchange risks.

Recent data indicates that selling isn't accelerating, and there might be a slight shift in investments from the Eurozone back to the UK due to the current financial troubles in France. Despite this, a weaker GBP, along with fiscal credibility and peak real yields, could be necessary to reignite interest from non-U.K. investors.

The article also mentions that recent events have led to an increase in buyers for AUD/USD and USD/JPY, with the latter recovering from a recent low ahead of the FOMC decision and the BoJ policy update. Meanwhile, gold is showing a downtrend, falling below $4,050 as the market anticipates the central bank's decisions. The Federal Reserve is expected to keep rates unchanged when it announces its policy decision later today.