- GBP/USD rises to near 1.3245 as the British Pound outperforms its major peers.
- The British currency gains even as market experts doubt hawkish BoE repricing.
- Investors keenly await the US NFP data for September scheduled for Friday.
The British Pound (GBP) is up 0.15% at around 1.3245 against the US Dollar (USD) in the early European session on Monday. The GBP/USD pair gains as the British currency outperforms its peers despite market experts questioning hawkish Bank of England (BoE) repricing.
Strategists at Brown Brothers Harriman (BBH) highlight a growing disconnect between market pricing and their own expectations for the BoE policy path. They note that “the swaps curve continues to imply about 100bps of BoE rate hikes in the next twelve months to 4.75%,” but argue that “the BoE may not need to tighten as much as markets expect,” adding rates are already in the 2%-4% neutral range..
Meanwhile, the US Dollar trades marginally higher at the start of the week, with United States (US) Treasury Yields remaining elevated near the 19-year high of 5.23%. This week, investors will pay close attention to the US Nonfarm Payrolls (NFP) data for September, which will be published on Friday.
GBP/USD Technical Analysis
In the daily chart, GBP/USD trades around 1.3240, maintaining a bearish near-term bias as price holds below the 20-period exponential moving average (EMA) at 1.3387. The pair has been sliding away from late-July highs, and the EMA now aligns as overhead supply, hinting that rallies are likely to be capped while this barrier remains intact.
The Relative Strength Index (14) sits near 28, in oversold territory, suggesting that while downside pressure dominates, the pace of the decline could start to moderate if sellers hesitate at lower levels.
Analysts at UOB Group note that GBP/USD “extended its sharp decline from Wednesday, dropping to a low of 1.3205 before closing 0.16% lower at 1.3219.” They add that, “unsurprisingly, conditions are deeply oversold due to the sharp decline,” yet “the bias for GBP remains on the downside, even though any decline is likely to stay within a 1.3190/1.3245 range” in the near term.
Looking beyond the next 24 hours, UOB recalls that in its update from 23 September, when spot was at 1.3345, “it is unclear for now whether GBP could break below 1.3300,” and concedes that it “did not expect GBP to easily break 1.3300 and plunge, reaching a low of 1.3205 yesterday.” While the weakness that “started two weeks ago… appears to be overextended,” the bank still sees “a chance for GBP to test the June low of 1.3140 before stabilisation is likely.” On the topside, UOB flags that “a breach of 1.3295 (‘strong resistance’ level previously at 1.3390) would indicate that 1.3140 is out of reach.”
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