BoE: High rate hike expectations to weigh on GBP – Commerzbank

Economists at Commerzbank expect GBP to come under depreciation pressure as the market’s rate hike expectations have gone too far.

Expectations for rate hikes are quite high

“The large majority of market participants expect a further 25 bps rate hike in June and with a likelihood of 50%, it projects one further rate hike at the following meeting. That might support Sterling for now.”

“However, we see little scope for further Sterling appreciation as we consider intensifying rate hike expectations, which would presumably be necessary for this, to be less likely.”

“The situation on the labour market is likely to ease further, with inflation falling. We therefore mainly see the risk that the market’s rate hike expectations have gone too far and that it will have to lower these, which would probably weigh on Sterling.”