- Pound recovery fails at 1.1330 and the pair returns to 1.1220.
- Investors dampen hopes of BoE interest rate hikes after Truss’s death.
- GBP/USD is likely to hit 1.10 — ING.
The pound has given up most of the ground it had taken following the announcement of Prime Minister Truss’s resignation and is largely unchanged on the daily chart.
The pair rallied to session highs at 1.1330 with the market celebrating the departure of the controversial Truss government, only to run out of steam soon after and return to lower levels of 1.1200.
The market reduces the hopes of a rise in the BOE
The 180 degree turnaround in the tax cut plan and eventually the demise of the Prime Minister has led investors to downgrade hopes for an aggressive BoE rate hike in November. Broadbent, a member of the Monetary Policy Committee, said early on Thursday that the bank will respond to Britain’s tax and spending policies, in a sign that interest rates may not rise as much as expected.
Truss came to power with an economic program that rattled financial markets in September, triggering a sharp sell-off in sterling that forced the Bank of England to step in with a bond-buying program.
The tax cut fiasco split the Tory party and led to the resignation of two of its ministers in less than six weeks, damaging the country’s credibility.
GBP/USD could drop to 1.10 —ING
ING FX analysts see the current downtrend likely to extend towards 1.1000: “Political infighting and policy uncertainty continue to demand a risk premium for sterling so GBP/USD could easily back off to the low end of its wide 1.10-1.15” range.
Technical levels to watch
Source: Fx Street
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