GBP: Sterling Stirring Too Much? What's Next? - CIBC

CIBC FX Strategy Research argues that while the expectations for rate increases in the UK have supported GBP recently, it's unlikely for such a BoE-induced rally to be sustainable.

"...The fact that even normally fairly dovish members are talking of them suggests this time they could become reality. But the BoE will have to be very careful. Unlike other areas of Europe, growth hasn’t been accelerating this year. And the one upside surprise we got this week, in the form of retail sales, could be due for a correction given that real earnings growth is now back in negative territory.

So the upside in sterling linked to an initial BoE rate increase, if one is forthcoming, could be short-lived," CIBC argues.

Source: CIBC Economics - CIBC Capital Markets