It seems every time market expectations for Fed lift-off get pushed back, sterling gives back ground against the euro, notes CIBC World Markets.
"Why? Because markets assume that it’s impossible for the BoE to move first. Now it’s true that a move by Carney’s MPC this year is unlikely, while many FOMC members still appear to be thinking of a hike.
However, if Yellen and co. were to wait too long into 2016, the BoE may have to go first. And even if they lagged in the first move, the pace of increases in the UK could be a little steeper, as measures of spare capacity (such as the employment-population ratio and industrial capacity use) are already that much tighter in the UK. That would see sterling claw back lost ground against the US$," CIBC argues.
"Our 12-month target for GBPUSD is 1.60," CIBC projects.
