On the past week the market sentiment was defined by the Scottish referendum that took place on Thursday. Scotland has rejected independence with 55% saying "No" and 45% saying "Yes". Markets started pricing in this outcome earlier in the week, so British pound recovered by more than 350 pips in 5 days. Investors will now refocus back to the UK economic fundamentals and to the expected terms of the Bank of England policy tightening.

September monetary policy minutes released on Wednesday showed that 2 out of 9 MPC members still support a 0.25% rate hike. However, the overall tone rather dovish: majority of the policymakers point that inflationary pressure remains too low to justify a rate hike. In their view, negative risks for the economy increase in Q4. Great Britain released strong labor market data on Wednesday with unemployment falling from 6.4% to 6.2%.

Technically, the cable jumped to $1.6520 on Friday. The pair is trying to break out of the bullish weekly Ichimoku, but is capped by the 55-week MA so far. Given the market “relief” on the Scottish vote, we expect the pair to extend the upside on the coming week. The pace of growth will likely slow down though: we target the $1.6600/6620 area (50% Fibonacci from the July-September selloff). Next resistance lies at $1.6690 (March lows). The picture will remain bullish above $1.6250. 

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