Narrow ranges beginning to take shape for GBP/USD
Oct 18 (Reuters) -After a sizeable rebound, the dollar rally is beginning to peter out around the 200-day MA (103.78) and with the index in overbought territory – according to the 14-day RSI – FX may begin to consolidate ahead of the U.S. election, perhaps offering sterling some respite.
Markets appear better priced for the election scenarios than a few weeks ago. This is perhaps most evident in the bond market whereby yields on the benchmark 10-year has rallied from circa 3.6% to 4.1%. Meanwhile, key event risks in the rear-view mirror is another factor that may see major FX pairs in narrow ranges, though, the upcoming flash PMIs will be a potential mover.
Given the halt to the dollar’s advance, GBP/USD has managed to maintain a foothold above key support at 1.3000. Though, despite a strong retail sales report, the pair was capped at the pre-CPI breakdown level at 1.3068.
The big story for the U.K. this week has been the easing of inflation persistence measures and as a result, markets have rightly raised the probability that the Bank of England speed up the pace of rate cuts.
Thus, following the clear dovish turn in the data, focus will turn to upcoming speeches from BoE officials, particularly the more hawkish members who have argued that inflation persistence has meant that the MPC should take a more cautious approach.
Looking ahead, four BoE officials are on the docket next week, two of which – Megan Greene and Catherine Mann – have yet to vote for a rate cut during this cycle.
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(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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