Growth overpriced, but policy differentials continue to stick out
We view sterling as one of the most vulnerable currencies in G10. Policy expectations for the currency are already very mature on a relative and absolute basis, and advancing them would demand further positive data surprises or significant adverse economic adjustments elsewhere. This week’s releases of UK price and employment data are unlikely to help sterling’s case. However, the ECB’s growing caution on the euro adds a new dimension to FX and policy and leaves the BoE uncomfortably exposed.
Read the full report: UBS