Sterling trades down 0.65% at around mid 1.2800s, the lowest level since August 31 last year after the UK government said to plan a no-deal Brexit meeting in September. Earlier on Wednesday, the MPC member Ian McCafferty said the market expectations for a couple of rate hikes during the next two years are acceptable.The August Inflation Report projections are indicating one rate hike in Q1 2020 and another one in 2021.
Although Ian McCafferty is leaving the Monetary Policy Committee, his hawkish views are well known as he was voting for a rate hike since March until finally, the Bank of England raised the Bank rate to 0.75% last week delivering dovish monetary policy outlook.
Brexit uncertainty and the lack of economic stimulus both weigh on Sterling that broke 1.3000 psychological level this week and after the news of the UK government readying itself for no-deal scenario it easily broke below 1.2900 and reached the target of 1.2870, representing 61.8% Fibonacci retracement of the uptrend from a post-Brexit low of 1.1940 to 1.4373. With the no-deal Brexit scenario becoming the official strategy, the GBP/USD is likely to be exposed to further selling pressure as it is trapped in the downward sloping channel.