- GBP/USD closes the week above 1.3600 frem 1.3405 lows in late September.
- BoE tightening expectations have fuelled the pound's recovery.
- GBP/USD seen at 1.41 in 2022 – Westpac.
The British pound has found support at 1.3610 after having hit resistance at one-week highs of 1.3660 earlier today. The pair consolidates above 1.3600 after a significant recovery from year-to-date lows near 1.3400 last week.
Pound appreciates on BoE hike expectations
The sterling appreciated across the board this week, as market expectations of a BoE hike next year have offset investors’ concerns about the fuel shortages and supply disruptions that pushed the GBP top mid-term lows last week.
Market sources are anticipating the possibility of the Bank of England leading the rest of the world’s major central banks to start raising interest rates in order to tackle inflation pressures. In that case, the market is pricing the first interest rate hike next February.
Furthermore, the widely awaited US Non-Farm Payrolls report has disappointed, showing a 194,000 increase in employment, well below market expectations of 500,000 new jobs. The dollar retreated immediately after the release, to pare losses shortly afterward, as the market assumed that these figures would not change Fed’s plans to start tapering bond purchases over the next months.
GBP/USD seen appreciating to 1.4100 in 2022 – Westpac
According to the FX Analysis Team at Westpac a more hawkish stance by the BoE is likely to support a long-term upside cycle, sending the pair towards 1.4100: “Its fuel shortage notwithstanding, the UK is expected to experience a robust recovery in GDP back to near the potential GDP level that would have been seen had the pandemic not occurred as well as sustained inflation at or above target over the entire forecast period. As a result, the BoE is expected to tighten, in line or just ahead of the FOMC (…) We look for GBP/USD to rise to 1.41 in the second half of 2022, and to only edge back to 1.39 at end-2023.”
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.