BofA: Why The Hurry To Cut?

Bank of America write “a key part of our constructive view on GBP this year has been that the pound would find cyclical support as the BoE would be amongst the last of the major central banks to cut against a backdrop of sticky inflation.”

• “Whilst GBP remains the best performing currency year-to-date, the usual positive April seasonality has not played out, largely because of continued Fed repricing and renewed geopolitical risks.”
• “Elsewhere, recent comments from the BoE have sounded increasingly dovish.”
• “The key question is whether the BoE is taking an incremental step in its forward guidance towards easing, or whether they are making a concerted effort to bring forward market expectations for a rate cut? For now, we are inclined to think it is the former.”
• “Nonetheless, GBP has succumbed to a cyclical unwind which looks excessive vs. the rates move, offering some hope for a rebound. But June BoE optionality suggests gains are likely to be capped.”