ING Research sees GBP/USD gains limited at 1.1750 in the near-term.
"Sterling continues to enjoy a renaissance, but we would argue that further gains will be harder to come by. The fiscal credibility premium has reduced substantially, and increasingly the markets will be left to focus on the UK fiscal/monetary policy mix. Here the delay in the release of the government's fiscal plan to November 17th serves as a reminder that there is a lot to play for. Does the delay signify greater cost-cutting at work or will the use of lower gilt yields and lower gas prices in the Office for Budget Responsibility (OBR) estimates mean that the Sunak government has to do less cost-cutting overall?," ING notes.
"Where the ground looks slightly firmer is on the Bank of England (BoE) side. Here a recent speech by the BoE's Ben Broadbent makes the case that the BoE does not need to respond as aggressively as the markets have priced to government spending plans. In effect, this is a push-back against the aggressive pricing of the BoE cycle. And if there is a risk to the consensus of the BoE hiking 75bp next week, it's that it merely rises by 50bp. The softer dollar environment means that the GBP/USD correction could extend to the 1.1750 area - but we doubt these gains last," ING adds.