GBP/USD: Decline nears interim support – OCBC
|The Pound Sterling (GBP) continued to trade with a heavy bias after BoE Governor Bailey unexpectedly spoke about adopting a more aggressive easing stance. Pair was last at 1.3100 levels., OCBC’s FX strategist Christopher Wong notes.
Catch-up in dovish re-pricing should continue to dampen GBP bulls
“In an interview with the Guardian last week, he said that the BoE could become a ‘bit more aggressive’ and ‘a bit more activist’ in its approach to cutting rates if the news on inflation continued to be good. This is a flip from the last MPC in Sep where policymakers emphasized the need for policy to stay restrictive for ‘sufficiently long’ and that most members saw the need for gradual approach to removing restraint.
“A catch-up in dovish re-pricing should continue to dampen GBP bulls. Our house view on rates remains unchanged – another 25bp cut in the Bank Rate before year-end, likely at the November MPC meeting. Thereafter, we expect one 25bp Bank Rate cut in every quarter in 2025. Our rate cut expectation is based on our lower inflation forecasts than BoE’s. Governor Bailey’s latest comments have to reflect a change in the assessment of inflation and/or growth outlook.”
“Daily momentum is bearish bias while decline in RSI slowed near oversold conditions. Consolidation likely for now. Support here at 1.3090 (50 DMA), 1.30 (38.2% fibo retracement of Apr low to Sep high) and 1.2935 (100 DMA). Resistance at 1.3166 (23.6% fibo), 1.3230 (21 DMA).”
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