GBP/USD to drift higher toward the 1.4250 mark – TDS
|The recent spate of hawkish comments from the Bank of England has turned the August MPC into a "live" meeting. Economists at TD Securities think expectations for a possible end to QE should provide GBP with a supportive tailwind over the next several weeks.
BoE cements its position as one of the more hawkish G10 central banks
“We've seen some rather hawkish BoE comments over the last 24 hours, which has seen markets pull forward their expectations for BoE rate hikes. We have at least two MPC members who see the BoE's forward guidance conditions around tightening to have been essentially met already, which raises the risks of QE being curtailed early at the August meeting, and rate hikes beginning earlier than our current May 2023 forecast.”
“Expectations for a possible end to QE next month should provide GBP with a supportive tailwind over the next several weeks.”
“With the Fed Chair reinforcing the "patient" stance of the FOMC this week, we think cable has some scope to rebound from some of its recent weakness. Indeed, real yield differentials have turned higher since the start of the month.”
“From a technical perspective, momentum indicators had already begun to shift more in sterling's favor while some degree of bullish divergence started to creep in on the daily RSI.”
“At this stage, we would be fairly surprised to see cable trade below early-July trough at 1.3733 without a very good reason for doing so during the current market cycle. There, we would expect bids to emerge between the 200-DMA (1.3693) and 1.3671.”
“We think cable is likely to drift toward the upper end of recent ranges at 1.4250 in the run up to 5 August. Initial resistance is likely to be seen around the recent range tops (1.3910), while the 100-DMA currently stands at 1.3937. Above that, we think the next major target will be the 1.4000/10 zone ahead of 1.4085.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.