GBP strength would weigh on the BoE’s propensity for additional hikes - ING

The inflationary damage is already done from GBP’s sharp post-referendum deprecation and on a trade-weighted basis, GBP still remains 8-10% below its pre-referendum levels, points out Viraj Patel, Foreign Exchange Strategist at ING.

Key Quotes

“Given the size of the shock – and ongoing uncertainty – it may end up being that the pass-through effects of GBP's post-Brexit depreciation turn out to be less transitory – and more persistent – than originally thought. Given the Bank’s growth-inflation trade-off, a gradual normalisation cycle and slightly stronger GBP is unlikely to derail UK economic growth (especially if the domestic side remains resilient) – but will help to keep price pressures in check. We saw evidence of this shifting trade-off at today’s BoE policy meeting.”