It doesn’t really matter how much the BoE raises the bank rate in November, by 75 basis points or 50 basis points. The environment in which the central bank makes decisions is challenging, and the deterioration in global risk appetite presses down the GBPUSD. Let’s talk about these topics and draw up a trading plan.
Monthly fundamental forecast for GBPUSD
When making any decision, it is essential to keep a cool head. When a verdict is delivered in an extremely unfavorable environment or in a state of shock, there is a high probability of making a mistake. The Bank of England faces a challenging task. It must decide how high to raise the bank rate in a stagflationary environment and uncertainty about the government’s future fiscal policy. This circumstance, along with the Fed’s actions the day before, sent down the GBPUSD.
46 out of 53 Reuters experts predict that borrowing costs will rise by 75 bp in November, which will be the widest BoE move since 1989. The interest rate will rise to 3%, the highest level since 2008. The derivatives market estimates its ceiling in the current monetary restriction cycle at 4.8%. It is pretty high, although the forecast now is significantly lower than at the time when Liz Truss announced a new fiscal stimulus package. Then, the interest rate ceiling reached 6%.