BoE brightens sterling outlook a day after US election-fueled drubbing
Sterling could be in for more gains after traders focused on BoE Governor Andrew Bailey's indication of a gradual approach to future easing after the bank delivered an as expected 25bp cut on Thursday.
Sterling bulls pushed cable to a session high of 1.2996 after the BoE voted 8-1 to cut rates, brightening prospects for more gains a day after the U.S. election results appeared to dim the pound's outlook.
Following the UK budget, GBP/USD slid to 1.2845, and during the post-election kerfuffle, it dipped to 1.2835 before rebounding to current levels.
With support holding in the mid-1.28s, a path may be clearing for GBP/USD to return to trading on rate differentials, which now favor further GBP strength.
The BoE rhetoric suggests sterling rates may land at a higher level by year-end 2025 than previously expected, as indicated by LSEG’s IRPR, which should lift GBP/USD.
The fly in the ointment for bulls may be the Fed. If the U.S. central bank were to temper current rate-cut expectations owing to political concerns, sterling's rate advantage may diminish.
For now, GBP/USD finds resistance near its daily cloud base by 1.3050 and more significantly 1.3135, the 50% Fib of 1.3434-1.2835.
A close above 1.3135 may shift momentum to bulls for a test of early October highs by 1.33.
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GBP Chart: https://tmsnrt.rs/4hH6EYb
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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