TD Securities Warns Against Riding GBP Rally on Hawkish BoE Vote

TD Securities' FX strategist Howard Du notes that the British Pound (GBP) initially rose by 0.3% against both the US Dollar (USD) and Euro (EUR) following a hawkish 6-3 vote split at the Bank of England's (BoE) monetary policy meeting.

The BoE voted to maintain interest rates, with Mann joining the rate hike camp in a move that was not part of market consensus. However, Du emphasizes that the rest of the committee seems comfortable keeping rates on hold due to limited second-round effects observed in inflation data.

As such, TD Securities advises fading short-term British Pound strength against both EUR and USD, expecting EUR/GBP to retrace back toward 0.86 as the UK's political risk premium rebuilds into the Autumn Budget.