GBP: How low can it go – Rabobank

By FXStreet Jane Foley, Research Analyst at Rabobank, notes that in spite of this morning’s release of a -1.1% m/m plunge in UK December industrial production, sterling is holding on to a better tone vs. the EUR.

Key Quotes

“That said, in the year to date the pound is the third worse performing G10 currency after the NZD and the AUD. In part the dismal showing of sterling since the start of 2016 reflects the money market’s current belief that there is no chance of a Bank of England rate rise this year.

Last month BoE Governor Carney was candid in his remarks that “now is not yet the time to raise interest rates”. Although it can be argued that Carney was aligning his views with those of the market, dovish expectations continued to gain ground so that by last week the futures market was pricing in a greater chance of a rate cut this year than a rate hike.

Given the weight of dovish expectations already in the market, it is likely that the impact of UK data misses will be limited in the near-term. With this in mind we would expect that sterling could find greater direction in politics in the …read more

Source:: FX Street