BoE Gives Green Light For Lower GBP
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The MPC decided a 25bp cut, 60bn of new gilt purchases (over six months), 10bn of corporate bonds (over 18 months) and a term funding scheme. The BoE communicated a policy strategy fairly consistent with our expectations, buffering the increase in spare capacity and allowing for a sustained inflation overshoot. This much suggest they won’t lean against FX depreciation
The BoE exceeded consensus and with forward guidance signaled more easing to come.
Combined, we think the measures are sufficient to keep existing GBPUSD shorts in the trade (ours included). This week's decision is consistent with medium term GBP weakness.
Citi maintains 2 short GBP/USD positions targeting 1.28 and 1.25.