GBP/XCD Outlook: The outlook for GBP/XCD is bullish, as the rate is currently at 90-day highs, significantly above its recent average, bolstered by strong international risk appetite.
Key drivers:
- Rate gap: The Bank of England is expected to maintain stable rates, while the Eastern Caribbean Central Bank faces challenges, supporting GBP strength against XCD.
- Risk/commodities: Oil prices have recently declined, which may weaken the XCD, given its reliance on tourism and external economic conditions.
- One macro factor: UK's projected GDP growth slowdown due to the threat of new US tariffs may limit GBP gains, but it remains resilient against the XCD.
Range: GBP/XCD is likely to hold within its recent range, showing stability but with potential for upward drift towards higher levels.
What could change it:
- Upside risk: Improved UK employment figures could strengthen the GBP further.
- Downside risk: Heightened global trade tensions could negatively impact the GBP.