The Bank of England will hold an interest rate meeting this Thursday. The market generally expects the Bank of England to remain on hold at this meeting. However, Barclays pointed out that the Bank of England may indicate in a statement that it is open to more easing. This will put pressure on the pound, with GBP/USD expected to fall to 1.27 by the end of the year.

The latest Reuters survey shows that the Bank of England will remain on hold in September and may lower interest rates by another 15 basis points to 0.1% in November. The Bank of England is not expected to increase the total scale of QE before the end of 2017. The median survey expectation shows that the probability of a rate cut by the Bank of England in September is only 10%, and the probability of a rate cut in November is 55%.

Bloomberg's survey results are more optimistic. Almost 100% of economists surveyed believe that the September interest rate decision will maintain the benchmark interest rate at 0.25% and the scale of QE unchanged. At the same time, 73% of economists surveyed believe that the Bank of England will cut interest rates once this year.

However, Barclays pointed out that although the Bank of England will maintain monetary policy unchanged on Thursday, the meeting statement may show an openness to more easing. The downward risk of the domestic economy may continue to put pressure on the pound. It is expected that the pound/dollar will fall to 1.27 by the end of this year.

BNP Paribas' STEER indicator shows that the pound's reaction to positive economic data is too extreme compared to the reaction of other asset markets. Still insisting on shorting GBP/USD, the target is 1.28 by the end of this year.

GBP/USD futures on CME Group fell on the eve of the Bank of England meeting.

EUR/USD futures fluctuate at 1.2131.

(CME Group’s September pound and euro futures contract charts –Source: CME Group information website Futures News Today)

Bank of Tokyo-Mitsubishi UFJ takes a different view. The agency said that improvements in many economic indicators in recent weeks have been critical to the improvement in the price of sterling. It is expected that the pound may rise further in the near future as speculative short positions are closed.

Although the Bank of England lowered its economic growth forecast at the August interest rate meeting, the recent outstanding performance of the British economy has significantly boosted market confidence.

Bank of America stated in its latest report that it no longer expects the UK economy to fall into a mild recession in the near future. UK GDP is expected to grow by 1.8% and 0.7% in 2016 and 2017, respectively. Bank of America predicts that the Bank of England may not cut interest rates again in 2016.

At the August interest rate meeting, the Bank of England cut interest rates for the first time in seven years and expanded the scale of QE. The benchmark interest rate was lowered by 25 basis points from 0.5% to 0.25%. At the same time, the Bank of England unexpectedly increased its asset purchases by 60 billion pounds to 435 billion pounds, and will purchase 10 billion pounds of corporate bonds in the next 18 months. After the interest rate decision was announced, the pound fell sharply by 200 points, and the yield on government bonds hit a record low.

Data show that since the second quarter of this year, the UK's political and economic risks due to Brexit have increased, and global investors have become more active in arbitrage and risk management in Asia. As a result, CME Group's pound futures accounted for more than 40% of the global trading volume during Asian hours (8 a.m. to 8 p.m. Beijing time).