GBP/USD Hits New High Amid BoE Tightening Expectations
Scotiabank strategists Shaun Osborne and Eric Theoret note that the British Pound (GBP) has reached a one-week high against the US Dollar, with markets seeing little chance of a move next week but incremental hikes into year-end.
The GBP/USD is steady after reaching this new high, supported by rising Bank of England (BoE) tightening expectations and sensitivity to higher Oil prices. This is in line with other European currencies and central banks, which are also affected by oil price gains.
Despite fiscal risks remaining elevated ahead of the UK budget release in late October, Osborne and Theoret point out that short-term rates market still sees very little chance of a policy adjustment at next Thursday's meeting. However, they do expect 17 basis points of tightening for November 5th and a cumulative 32 basis points by December 17th.
The GBP has been in a clear bullish trend from June, with resistance near 1.3650 and support around 1.3480. The RSI is marginally above 50 but showing fractional gains reflecting the latest recovery in spot over the past week or so.