GBP is likely to struggle in a risk-off environment – HSBC

Economists at HSBC think that the dominance of the RORO phenomenon and possibly Brexit headlines will likely bring more volatility to the pound in the near-term.

Key quotes

“The BoE kept its monetary policy unchanged, but two members voted for more asset purchases. With downside risks to inflation and the split vote, our economists think the door is open to more QE.

“As the UK economy begins its lockdown exit programme, most likely later this month, the GBP may spend more energy contemplating a different exit. As the possibility of a hard Brexit cannot completely be ruled out, a focus on Brexit might weigh on the GBP.”

“The GBP has moved into the frisk-on' bucket, possibly because of Brexit and the UK economy's gradually softening ties with the large economy of the Eurozone. As such, the GBP is likely to struggle in a risk-off environment, in our view.”