- 2-year US-UK bond yield differential remains elevated even though BOE is seen raising rates this week
- EUR/GBP sell-off could cap losses in GBP/USD
BOE likely to raise rates
While the Bank of England is seen raising rates by 25 basis points on Nov. 2, the Bloomberg survey says three out of nine policy makers are likely to vote against the move. This could be the reason for the resilience in the two-year US-UK yield spread/difference, which currently stands at 114 basis points (bps), the highest level since early September.
Thus, the British Pound is unlikely to strengthen significantly while heading into the Thursday's BOE rate decision.
However, the downside could be capped by a potential sell-off in the EUR/GBP pair. The two-year UK gilts yield more than 100 bps over their German counterparts. Plus, Catalan crisis boosts UK's appeal as regional safe haven. The resulting drop in EUR/GBP (increased demand for GBP) could offer support to Cable.
GBP/USD Technical Levels
A break above 1.3162 (Fri's high) would open doors for a possible cut through 1.3187 (50-DMA) and a rally to 1.3279 (previous day's high). On the other hand, a break below 1.3060 (100-DMA) could yield a sell-off to 1.3027 (Oct 6 low) and 1.30 (psychological level).
|TREND INDEX||OB/OS INDEX||VOLATILY INDEX|
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.