GBP/USDFUNDAMENTAL HIGHLIGHTS:
Modest Reprieve for GBP
After the sell-off into the month-end, this week has seen a modest reprieve in GBP/USD[2], helped by the slide in EUR/GBP[3] through 0.85 and GBP/JPY[4] demand. In turn, with EUR[5]/GBP[6] in close proximity to its YTD lows, this will be important as to whether Cable can keep tracking higher.
BoE Rate Rise By Year-End Is Optimistic
A major focus of mine regarding the Pound in the last few sessions has been the aggressive tightening priced into the rates market, which currently signals an 86% probability of a 15bps rate hike by the end of the year. To me this is very much on the optimistic side and would happily take the opposite side of that view and say the BoE will not raise rates this year.
Highlights include Jobs Report and BoE Speakers
Next week will see the August Labour market report and while I expect the Pound to become increasingly sensitive to economic data and central bank speeches given the current money market pricing. The upcoming jobs report will not include the impact of the furlough scheme expiration, in fact, the October Labour market report will not be available to the BoE before the last quarterly meeting of the year (Nov). Therefore, if the November meeting was to be considered “live” the BoE would have to rely on survey data, which doesn’t exactly fit with the BoE’s usual cautious stance. That being said, with UK data set to get weaker amid the UK energy crisis weighing on consumption, coupled with the expiration of the furlough scheme, the Pound is vulnerable
