GBP Risks Dovish Repricing as Market Sees Aggressive Rate Hikes Ahead

The British Pound (GBP) is facing potential risks from the Bank of England's (BoE) rate expectations, according to Brown Brothers Harriman's (BBH) Elias Haddad.

Haddad argues that the UK's July Gross Domestic Product (GDP), expected to remain flat month-on-month, will not alter BoE expectations.

The swaps curve implies 75 basis points of tightening to a policy rate of 4.50%, which Haddad finds too aggressive and leaves the GBP exposed to a dovish BoE repricing.

Haddad highlights several factors that support this view, including a negative output gap, a policy rate above the mid-point of the BoE's neutral range estimate, and the prospect of tighter fiscal policy.