GBP/USD to weaken and challenge 1.26 over the coming weeks – HSBC

The British Pound remains the best performing G10 currency so far in 2023. Economists at HSBC analyze GBP outlook.

Any moves above 1.30 are likely to be brief

Positioning and valuations are a hindrance to further upside. 

Even a 50 bps hike from the Bank of England (BoE) on Thursday may not provide lasting support for the currency, particularly given likely downward revisions to inflation projections and a split vote. There is a sizeable chance that the BoE raises rates by only 25 bps, which will likely see the GBP weaken immediately. 

We look for GBP/USD to weaken and challenge the support at 1.26 over the coming weeks, while any moves above 1.30 are likely to be brief.