British Pound: BoE tightening expectations lend support against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret note GBP/USD is steady after reaching a one-week high, with the British Pound (GBP) supported by rising Bank of England (BoE) tightening expectations and sensitivity to higher Oil prices. Markets see little chance of a move next week but price incremental hikes into year-end. They highlight a clear bullish trend from June, with resistance near 1.3650 and support around 1.3480.

Pound holds bullish trend despite fiscal risks

"The pound is also entering Wednesday’s NA session unchanged vs. the USD after – also – hitting a fresh one week high. As with the EUR and the ECB, we note the GBP and BoE’s greater sensitivity to oil price gains as policymakers seek to achieve their price stability mandates."

"The short-term rates market is still pricing very little chance of a policy adjustment at next Thursday’s meeting, but pricing about 17bpts of tightening for November 5th and a cumulative 32bpts by December 17th."

"Fiscal risk remains elevated as market participants look to the release of the UK budget in late October. In terms of data, we continue to note the absence of any material releases ahead of Friday’s trade and industrial production figures."

"Neutral/bullish – the RSI is marginally above 50 but showing fractional gains reflecting the latest recovery in spot over the past week or so. The magnitudes are minimal."

"The daily chart reveals a clear bullish trend from June with a sequence of higher lows and higher highs. We note the absence of any material resistance ahead of 1.3650 and see support closer to 1.3480."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)