MUFG Research sees a scope for GBP/USD to drop towards 1.10 over the coming weeks.
"With the energy price cap included, the fiscal impact could be up to GBP 250bn which will have a notable impact on the GDP growth profile over the coming two years. The energy cap does diminish that concern somewhat but the cap is still rising in October and for an average household, the energy bill increase is close to 100% YoY," MUFG notes.
"So recession is still coming just milder than assumed. The BoE hiked by 50bps today the combined total reaches 215bps, which leaves the BoE lagging by 10bps the RBA, RBNZ and Norges bank and by 85bps the Fed and the BoC. It would certainly prompt some further GBP/USD selling toward the 1.1000 level." MUFG adds.