GBP Set for Hawkish Turn as BoE Growth Forecasts Revised

Societe Generale analysts are bullish on the British Pound (GBP), predicting it will outperform its G10 peers outside of the US Dollar. The bank's economists point to accelerating UK growth and inflation as key drivers, which they believe will strengthen the case for a more hawkish Bank of England (BoE).

The minority of hawks on the Monetary Policy Committee (MPC), led by Chief Economist Pill, are backing an immediate increase in Bank Rate. This could happen as early as November, with 94% of markets pricing in a hike at that time.

Additionally, if the BoE decides to pause or stop gilt sales (quantitative tightening), it would cause long-end yields to flatten and ease the burden on fiscal policy. This could have a positive impact on the pound, as its correlation with yields has diminished due to global fixed income selloffs.

The bank's economists are aligned with consensus for a status quo of Bank Rate at 3.75%. For EUR/GBP, key support is seen at 0.8530, while graphical levels around 0.8610 may act as resistance.