BOE Rate-Hike Expectations Lift GBP
BOE Tightening Expectations Rise
GBPUSD continues to push higher this week with the pair benefiting from recent USD weakness as well as a resurgence in BOE rate-hike expectations. Looking at the UK side of things first, the recent uptick in UK CPI which rose back up to 2.9% last month, from 2.6% prior, has seen traders rebuilding their BOE tightening forecasts. Money markets are now pricing in at least one further BOE hike this year. PMI readings were also seen rising to two-year highs this month, reflecting growing confidence around new UK PM Andy Burnham.
UK/US (BOE/Fed) Divergence
There have been some strong signs of resilience in the UK economy recently which have prompted traders to hold onto BOE tightening expectations which had been falling earlier in the summer as a result of lower oil prices and softer inflation. However, with energy prices rising again amidst the re-escalation of the Iran war, inflation expectations are now back on the rise too. With this in mind, any further UK data strength should see BOE rate hike expectations strengthening further adding additional support for GBP. USD meanwhile has been falling recently on a downturn in US data and softer signalling from the Fed which has seen Fed rate hike expectations plunging recently, creating firm divergence between GBP and USD.
Technical Views
GBPUSD
The bullish triangle break in GBPUSD is starting to gather pace now with price currently testing the 1.3656-level resistance. With momentum studies bullish, focus is on a continuation higher and a test of the 1.3774 level next, ahead of the 1.3868 YTD highs.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.