Sterling has little or no upside – SocGen

The Bank of England (BoE) is set to further delay quantitative tightening until gilt markets calm. This is unwelcome news for sterling, in the view of Kit Juckes, Chief Global FX Strategist at Société Générale.

BoE to delay the start of QT

“I can’t imagine anyone being very surprised that the BoE is reported to be delaying the start of QT, due to current gilt market volatility. It’s obviously not a sterling-friendly move, delaying the tightening in financial conditions that would result from QT, but the gilt market itself seems largely unmoved.”

“10-year yields have settled down just below 4% for now, and the next thing that should move them will be a re-pricing of the front end of the curve, which still prices rates getting to 5% (from 2.25%) within six months. That seems wrong, to me and if that’s what it takes to keep sterling here, then it has little or no upside.”