GBP/USD: Range trade expected as BoE bets shift to cuts – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad highlights that GBP/USD is trading near 1.3500 after a mixed United Kingdom (UK) labor report, with falling unemployment but weaker payrolls. Easing wage pressures below the BoE’s projections support renewed easing later this year. BBH expects BoE rate hike pricing to revert to cuts and sees GBP/USD confined to a 1.3400–1.3700 range in the near term.

Mixed data but easing wage pressures

"Importantly, easing wage pressures leaves room for the BoE to resume easing later this year. In line with consensus, the policy-relevant private sector regular pay growth slowed to 3.2% y/y in February vs. 3.3% in January."

"That’s the lowest pace of wage growth since October 2020 and is below the BoE’s Q1 projection of 3.5%."

"We expect BoE rate hike bets to flip back to cuts given excess slack in the UK economy. The BoE estimates a negative output gap of -1% of GDP in 2026."

"GBP/USD will likely trade within a 1.3400 and 1.3700 range in the near term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)