GBP/USD: The 1.36 level is under threat – Westpac

The Bank of England will have to balance supply chain constraints and surging prices and recovery risks as fiscal responsibility resurfaces. GBP/USD range support at 1.36 may remain under threat, economists at Westpac report.

See: BoE Preview: Forecasts from 10 major banks, looking for clues on tapering timing

UK is encountering acute supply constraints

“Concerns of further supply constraints, shop shortages, and price triggering potential corporate failures (Green Gas has already folded) and household hardships have become a political issue with Govt. stepping in to avert other supply chain issues (notably CO2 supplies to the food industry).” 

“How the BoE addresses supporting the post-pandemic recovery, which remains at risk of further lockdowns, and containing price pressures will also have to be balanced against how Chancellor Sunak seeks fiscal responsibility at the Autumn Budget (27th Oct.).” 

“GBP has felt the strain of these conflicting issues since mid-Sep. BoE reactions will be critical for GBP/USD as it threatens support within its recent 1.36-1.40 range.”