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Sep 23 - 11:55 AM

GBP/USD - COMMENT-Sterling Holds Rally, Near 1.3750, After Hawkish BoE Taper Vote

By Paul Spirgel  —  Sep 23 - 10:16 AM

Sterling maintained European session gains and was last up 0.87% at 1.3740 on Thursday after a hawkish BoE rate hold, which included Deputy Governor Dave Ramsden joining Michael Saunders in voting for reducing the gilt purchase target.

Though the BoE remained concerned about the outlook for the labor market and inflation, members agreed some of this uncertainty should be resolved in coming months nS8N2OX0A3.

UK short-sterling futures fell, pricing in a BoE hike in February 2022, 0#FSS: and more than two full 25bp increases by Dec 2022.

With the BoE matching the Fed's determination to embark on normalization, the pound was able to recoup some recent losses.
However, U.S. Eurodollar futures hint that once the Fed begins its own rate hikes, now priced in Q4 2022, the Fed will hike at a faster rate than the BoE, which may cap GBP/USD strength.

Rising global inflation and doubts creeping into the "transitory" narrative has shifted markets' focus squarely to employment and the trajectory of COVID cases as the pandemic recovery progresses.

GBP/USD's rally off trend lows near 1.3600 eyes a cluster of daily moving averages and daily cloud base resistance in the mid-1.37s, above which the daily cloud top by 1.3881 and 100-DMA by 1.3902 cap.

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Source:
Refinitiv IFR Research/Market Commentary

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