- BoE in focus, 80% chance of a 25bp hike in Nov
- USD firm and Wall Street bullish on US politics
- Trump “very, very close” to making the Fed Chair decision
After ranging between 1.3170-1.3203, cable was bid early on in London due to the Spire/Mediclinic M&A news, making for a high of 1.3227. For the US session on Monday, GBP/USD at 1.3205, is up 0.16% on the day, having posted a daily high at 1.3229 and low at 1.3158.
The US dollar stayed with the bid on Monday while bond yields consolidated recent gains. The strength in the greenback is underpinned by markets now completely convinced with the Fed fund futures yields now pricing the chance of a December rate hike at 99%. The other drivers are political with the positive speculation regarding the ability of the GOP to push through tax reform this year, supporting Wall Street. Trump also said, again, that he’s “very, very close” to making the Fed Chair decision. The US dollar index was up 0.3% on the day.
BoE to hike rates in Nov?
Meanwhile, sterling traders are factoring a November rate hike from the BoE by around 25% and this week's GDP on Wednesday in the UK will be in focus. "Currently, the market is around 80% priced for a 25bps rate hike on November 2 and the latest Bloomberg survey suggests that more than three-quarters of analysts now expect the BoE to raise rates at its November meeting, up from around one in five in September," explained analysts at Rabobank.
GBP/USD levels
Analysts at Scotiabank are bearish. "Intraday price action looks soft for the GBP. Cable has traded with a softer bias since peaking near 1.37 in late Sep and the loss of key support around the 40-day MA (1.3242) last week implies more softness ahead for Cable and a likely test of longer run channel support at 1.3060. We see intraday resistance at 1.3220/40," the analysts explained. A break to the downside through 1.3100 and 1.3150 opens 1.2990 - this is the 2016-2017 uptrend. Then, a wide 1.2830 as being the 38.2% retracement ahead of 1.2575 as the 50% retracement.
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