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Nov 06 - 09:55 PM

GBP/USD - COMMENT-Sterling To Remain Volatile As Diverse Elements Collide

By Andrew M Spencer  —  Nov 06 - 09:15 PM

Sterling is likely to remain volatile as a swathe of domestic and international factors collide.

The pound fell 2% last Thursday after dovish Bank of England comments, bounced 1.9% Friday on hopes the U.S. Federal Reserve may reduce the pace of rate hikes, and fell 0.5% early in Asia Monday, as the U.S. dollar climbed on China reaffirming it's zero-COVID policy.
U.S. midterm elections this week could easily provoke further market uncertainty and turbulence.

In the UK, the Nov 17 autumn statement from Rishi Sunak's government will be pivotal for sterling. The Guardian reports that up to 60 billion pounds of tax rises and spending cuts may be announced.

If markets perceive the package strikes a credible balance to navigate inflation and recession pressures, sterling should climb.
If the measures to tackle the budget deficit deepen recession fears, sterling will fall.

Central bank outlooks and yield spreads currently weigh on GBP/USD.
The BoE said last week that market rate-hike pricing was too aggressive, as prolonged recession fears mount.
This contrasted with the Fed, which expects yields to rise higher than forecast, though it may slow the pace of hikes.

Technically the daily charts show no strong bias, with GBP/USD near the midpoint of a choppy 1.0925-1.1645 range, in place since late September.
A close outside this range should extend.

For more click on FXBUZ


Source:
Refinitiv IFR Research/Market Commentary

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