GBP/USD - 2Y US-UK spread remains elevated ahead of the BOE, focus on EUR/GBP

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

Omkar Godbole FXStreet Contributor

GBP/USD trimmed losses on Friday, largely on the back of the Catalan-led sell-off in the EUR/GBP. Cable strengthened moderately to 1.3140 levels in the Asian session today.

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
15M	Bearish	Neutral	Shrinking
1H	Bearish	Neutral	Shrinking
4H	Bearish	Neutral	Shrinking
1D	Bearish	Neutral	Shrinking
1W	Bullish	Neutral	High
Updated Oct 30, 02:45 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

GBP/USD pops to three-week highs above 1.3400

GBP/USD accelerates its advance and surpasses the key 1.3400 barrier on Wednesday. That said, Cable clinches new multi-week tops on the back of the resurgence of the selling interest in the Greenback despite persistent tensions in the Middle East.

EUR/USD reverses losses, targets 1.1450

EUR/USD trades with decent gains north of the 1.1400 hurdle in the latter part of Wednesday’s NA session. The fresh offered stance in the US Dollar allowed the pair to revert the initial drop and refocus on the upside despite the hawkish tone from the FOMC Minutes and persistent geopolitical tensions.

Gold trims losses, looks at $4,100

Gold manages to regain some composure and bounce off earlier lows on Wednesday. The precious metal now shifts its focus to the $4,100 mark per troy ounce amid decent losses in the US Dollar and steady geopolitical jitters.

Dogecoin Forecast: DOGE risks sliding below $0.07 despite returning retail interest

Dogecoin (DOGE) edges lower toward support at $0.07 at the time of writing on Wednesday. The meme coin reflects a broader sell-off in the crypto market, primarily attributed to uncertainty over tensions in the Middle East. Iran launched attacks on American military bases in the Middle East on Wednesday in retaliation for attacks by the United States (US) on several places in Iran.

2.50%: Why the Kiwi's first hike in three years is a wager on a number nobody can see

The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at 02:00 GMT on Wednesday, its first hike in three years and the moment the bank that cut deeper than any G10 peer last cycle turned to face the other way.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.