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Oct 20 - 10:55 PM

GBP/USD - COMMENT-Sterling Rangebound Until UK Political Dust Settles

By Andrew M Spencer  —  Oct 20 - 09:20 PM

Sterling has traded in a choppy 1.0925-1.1493 range this month as political uncertainty swirled. Further consolidation appears likely in the short term until the next UK government is formed and announces its policy framework.

Market reaction to the resignation of Prime Minister Liz Truss after six turbulent weeks was muted. Thirty-year gilt yields fell three basis points to 3.950%, as U.S. Treasury yields hit 14-year highs.
GBP/USD closed up 0.1%, with EUR/GBP up 0.05%.

Morgan Stanley's FX Position Tracker showed markets only modestly short sterling on Oct 17, so positioning, often a major driver of currency volatility, should not be a significant factor.

0#BOEWATCH prices a 75 bps rate hike to 3.00% on Nov 3 at 93.45% despite Bank of England Deputy Governor Ben Broadbentexpressing doubt that rates will rise as much as markets expect.
A 50 bps hike would hit sterling.

Former finance minister Rishi Sunak, considered a safe pair of hands, is the bookmakers' favourite to be the next PM.
The contest could be decided on Monday.

Whoever wins faces a daunting challenge, as cost-of-living pressures and energy prices surge, the economy heads towards recession, industrial unrest increases, and consumer confidenceis near record lows.

GBP/USD daily technical studies conflict as choppy consolidation extends. The major levels are 1.0925, the October low, and 1.1541, 61.8% of the August-September fall and the upper Bollinger band, which should contain moves.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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