GBP/USD has dropped below 1.22 after disappointing GDP data ahead of the Bank of England’s (BoE) decision on Thursday. A cautious stance from the “Old Lady” could send cable to new lows for the year, economists at Scotiabank report.

BoE may allude to an eventual pause in rate hikes

“Further to the USD rally on Fed bets and the weak market’s mood, UK April GDP disappointed economists’ expectations in data published this morning. The country’s economy surprisingly contracted by 0.3% MoM against a median forecast for a slight 0.1% expansion.”

“The poor GDP showing makes the BoE’s decision even more difficult. We think odds have risen that the bank alludes to an eventual pause in rate hikes – perhaps as soon as August, but more likely in September or November.” 

“OIS markets still seeing two 50 bps hikes across the four BoE meetings between now and November are in for a severe disappointment and the GBP is at clear risk of plumbing new lows for the year (and since mid-2020) under the mid-1.21s if the BoE delivers a cautious message this week.”