GBP Holds Ground Near 1.3200 as UK Economy Faces Hawkish BoE Uncertainty
The British Pound (GBP) has outperformed its major peers in early European trading on Monday, reaching near 1.3245 against the US Dollar (USD). This comes despite market experts questioning a potential hawkish Bank of England (BoE) repricing.
According to strategists at Brown Brothers Harriman (BBH), there is a growing disconnect between market pricing and their own expectations for the BoE policy path. They note that 'the swaps curve continues to imply about 100bps of BoE rate hikes in the next twelve months to 4.75%', but argue that 'the BoE may not need to tighten as much as markets expect,' adding rates are already in the 2%-4% neutral range.
The US Dollar trades marginally higher at the start of the week, with United States (US) Treasury Yields remaining elevated near the 19-year high of 5.23%. This week, investors will pay close attention to the US Nonfarm Payrolls (NFP) data for September, which will be published on Friday.
GBP/USD technical analysis shows a bearish near-term bias as price holds below the 20-period exponential moving average (EMA) at 1.3387. The Relative Strength Index (14) sits near 28, in oversold territory, suggesting that while downside pressure dominates, the pace of the decline could start to moderate if sellers hesitate at lower levels.
Analysts at UOB Group note that GBP/USD 'extended its sharp decline from Wednesday, dropping to a low of 1.3205 before closing 0.16% lower at 1.3219.' They add that, 'unsurprisingly, conditions are deeply oversold due to the sharp decline,' yet 'the bias for GBP remains on the downside, even though any decline is likely to stay within a 1.3190/1.3245 range' in the near term.