British Pound: Can the recovery against the US Dollar reach the upper 1.36 area? – Scotiabank

The Pound’s intraday gain of about 0.4% against the US Dollar has put the Bank of England decision in focus, according to Scotiabank’s FX strategists, while revisions to UK PMI readings have had little effect. A 25bp rate increase is largely reflected in market pricing, with additional tightening expected. On the technical front, the strategists regard a move above the 200-day moving average as constructive, with the rebound from the mid-October lows pointing towards the upper 1.36 region.

How Is BoE Pricing Supporting the Pound’s Rally?

"The GBP is pacing the EUR’s gains versus the USD, rising around 0.4% intraday. Final UK Services and Composite PMI data for October were revised slightly lower to 52.8 and 52.9 respectively."

"Beyond the USD fallout from the mid-terms, GBP attention will quickly shift to tomorrow’s BoE policy decision. A ¼ point hike is all but fully priced in at this point, with swaps anticipating a further 75bps of tightening from the BoE beyond tomorrow over the next year or so."

"A daily close above the 200-day MA (1.3425) would be constructive for the pound, a close above 1.3470 (61.8% retracement of the GBP’s Aug/Oct slide) more so. The GBP performance support our current thesis that the strong recovery in the GBP from the mid-October low (forming a major weekly reversal in the process) targets a return to the upper 1.36 area in the coming weeks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)