GBP/USD to dip towards 1.30 before resuming gains in the new year – Scotiabank

GBP/USD is weaker on GDP miss. Econimists at Scotiabank believe the Bank of England (BoE) is set to hold next week, triggering a fall to 1.30 on the cable.

Another pass this month by the BoE

“The UK economy expanded by only 0.1% MoM in October versus a median projection of 0.4% owing to a strong decline in construction output and flat manufacturing activity amid supply shortages.”

“OIS pricing still sees a roughly 40% chance, but we think it is almost certain that the bank holds. Given Saunders’s (top hawk) comments earlier this week that he would perhaps prefer to wait for more evidence on the Omicron front before altering policy, the bank could go as far as voting unanimously for a hold.”

“We see near-term weakness in the GBP toward 1.30 (on a hawkish Fed and a BoE hold next week, as well as political risks) but with gains resuming in the new year ahead of the BoE’s hiking cycle.”