#GBPUSD @ 1.08055 may take some time to settle as sterling needs credible policy delivery – ANZ
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GBP/USD is down 21% on a year-to-date basis. In the opinion of economists at ANZ Bank, policy credibility is key to GBP stability.
“The volatility serves as a salutary reminder of the need to deliver credible policy, particularly in the current climate of high inflation and asset price weakness.”
“We expect policy rates to rise materially further (4.0%) but think the market’s view of 6.0% rates is too high. Sterling may therefore take some time to settle, while the government needs to boost fiscal credibility.”
“An inter-meeting Bank of England (BoE) rate hike could be seen as a panic measure and make volatility worse. Defending a given exchange rate level is not feasible beyond the very short-term.”
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