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Nov 01 - 09:55 PM

GBP/USD - COMMENT-Sterling Set To Remain Soft Into BoE Rate Decision

By Andrew M Spencer  —  Nov 01 - 08:39 PM

Sterling is likely to remain under pressure due to uncertainty into the Bank of England rate decision and ongoing friction with the European Union, backed by a weak technical outlook.

Sterling climbed in October, stalling around 1.3830.
The move was largely driven by BoE Governor Andrew Bailey's hawkish comments, which saw markets price in rate rises from November nL1N2RE0KA.

The pound fell 0.7% in the last week, as confidence in a November rate hike wavered due to mixed UK economic data, making Thursday's rate decision the most contentious in a long time nL8N2RS4BN.

The Reserve Bank of Australia on Tuesday nL4N2RS08M and Federal Reserve on Wednesday nL1N2RS15M, face similar challenges to the BoE and may provide a guide.

Recent UK data clouds the outlook, with manufacturing struggling, as output growth slows and prices rise nZRN0038J6, while businesses report stronger-than-average growth nL8N2RP7AM.

Friction with the EU remains a concern, currently led by the France-UK fishing row, which could spiral into a wider trade dispute nL8N2RS1GE.

Technically, GBP/USD has oscillated between the upper and lower 21-day Bollinger bands since mid-July, pivoting around the 21-day moving average.

Cable rejected the upper Bollinger band in mid-October and closed below the 21-DMA on Friday, opening the way to a test of the rising lower Bollinger band at 1.3547.

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Source:
Refinitiv IFR Research/Market Commentary

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