GBP Reaches One-Week High as BoE Tightening Expectations Lend Support

The British Pound (GBP) has reached a one-week high against the US Dollar (USD), supported by rising expectations of Bank of England (BoE) tightening and sensitivity to higher oil prices, according to Scotiabank strategists Shaun Osborne and Eric Theoret.

Markets see little chance of a policy adjustment at next Thursday's meeting, but price incremental hikes into year-end, with 17 basis points (bpts) of tightening priced for November 5th and a cumulative 32 bpts by December 17th.

The GBP has held its bullish trend despite fiscal risks, which remain elevated as market participants await the release of the UK budget in late October. Scotiabank notes that the absence of any material releases ahead of Friday's trade and industrial production figures also contributes to the pound's resilience.