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GBP hit hard, to weaken further – Danske

FXStreet (Barcelona) - The Danske Research Team notes the dovish November Bank of England (BoE) inflation report hitting the GBP hard, and sees it weakening further against the Dollar, while NOK climbs following higher-than expected October CPI print.

Key Quotes

“BoE said that it is likely that inflation will fall below 1% within six months and that it sees significant risks to the inflation forecasts. The market has pushed back the first BoE rate hike to November 2015.”

“Near term, the GBP is likely to weaken further against the USD while trading in ranges of 0.78-0.80 against the EUR.”

“Yesterday, the NOK strengthened broadly, particularly against the SEK. Following the higher-than-expected October CPI print, the market is rightly gradually pricing out a Norges Bank rate cut, which provides some support for the NOK. However, the continuing sharp fall in the oil price poses downside risks to the Norwegian economy and hence we expect the rally in the NOK to be short-lived."

"Finally, we note the sharp bounce in EUR/DKK where we believe that Danmarks Nationalbank will cut the CD rate by 10bp to minus 0.15% before year-end.”

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