GBP Rises on BoE Hawks Warning of Inflationary Pressures

The British Pound (GBP) has gained ground against its major currency peers, except for the Japanese Yen (JPY), on Monday. Against the US Dollar (USD), the GBP is up 0.13% to near 1.3256.

This gain comes as several members of the Bank of England (BoE) have expressed concerns about higher inflationary pressures, which could lead to interest rate hikes.

Strategists at Brown Brothers Harriman (BBH) have highlighted a growing disconnect between market pricing and their expectations for the BoE's policy path. They argue that the swaps curve implies 100bps of BoE rate hikes in the next twelve months to 4.75%, but believe the BoE may not need to tighten as much as markets expect, given that rates are already in the 2%-4% neutral range.