Overview
The British pound (GBP) is experiencing a mixed recovery as expectations rise for a potential interest rate hike by the Bank of England (BOE) in November. While the GBP shows strength against the Australian (AUD) and Canadian dollars (CAD), its performance against the US dollar (USD) and Japanese yen (JPY) remains under pressure.
Current Market Sentiment
Recent economic data, including a significant rise in output prices reported in the September PMI, has bolstered hawkish sentiment regarding the BOE's monetary policy. Several Monetary Policy Committee (MPC) members have indicated that inflation pressures are persistent, leading to increased market speculation about a 25 basis point hike in November. The 3-month Overnight Index Swap (OIS) rates have risen to 3.91%, suggesting a 64% probability of this hike.
Technical Analysis of GBP
GBP/USD
GBP/USD has declined by 3.2% from its August high, but it is currently holding above key support levels from June and March. The outlook remains uncertain, with the potential for a countertrend move if it approaches these swing lows.
EUR/GBP
EUR/GBP has shown a bearish trend, aligning with the author's expectations. The recent price action suggests further weakening of the euro against the pound, with a target around 0.8437.
GBP/JPY
GBP/JPY remains in a downtrend, with nearby support levels. The price action is choppy, indicating potential for two-way trading, making it less attractive for bullish positions.
GBP/CHF
GBP/CHF is in an established uptrend, but recent volatility raises concerns about a potential topping pattern. A bullish hammer pattern has formed, suggesting possible recovery from recent losses.
GBP/CAD Technical Analysis
The weekly chart indicates an overall uptrend for GBP/CAD, with recent price action suggesting a bullish range expansion. Key support levels are identified at 1.8787 and 1.8764, with potential resistance at 1.9000.
GBP/AUD Technical Analysis
GBP/AUD is showing signs of a bullish reversal, with a potential inverted head and shoulders pattern forming. A break above the March high could confirm a longer-term bullish outlook, while immediate focus is on the June high as a resistance level.