- The British pound advances for the second day in a row amid market risk sentiment.
- GBP / USD: Faces strong resistance at 1.3830, despite aggressive comments from the Bank of England.
- US Q3 Corporate Earnings Keeps Investors Mood in Risk Appetite Mode, Boosts Risk Sensitive GBP.
- Brown Brother Harriman (BBH): Expectations of a rise in the Bank of England on November 4, cut by 50%.
The GBP is trading during the American session trading at 1.3789 at the time of writing. At the beginning of the Asian session, the pair GBP/USD It fell to 1.3756, but when European traders reached their desks, the pair jumped to 1.3829, faced stiff resistance and fell back towards current levels.
US Q3 Corporate Earnings Keeps Investors Mood in Risk Mode
The GBP rally during the European session is based on positive market sentiment. Factors like the tracking of US corporate earnings for the third quarter of last week, with Alphabet, Amazon and Apple Microsoft, which stopped reporting earnings this week, keep the market in a positive tone. Investors are assessing from those reports whether companies are passing on higher producer prices to clients, neglecting macroeconomic developments.
Additionally, earnings season remains in the driver’s seat, with high inflation and tighter monetary policy remaining in the back seat for now.
During the European session, British Chancellor Sunak will unfreeze public sector salaries next April. Reports suggest that Sunak will also announce an increase in the national minimum wage to GBP 9.50 per hour. He is scheduled to release his budget speech on Wednesday.
According to Brown Brother Harriman (BBH), in a note to clients, expectations of a rate hike from the Bank of England (BoE) for the November 4 meeting are being trimmed.
“WIRP suggests only a 50% chance of takeoff on November 4, below the full price at the beginning of last week. However, an increase in the next meeting on December 16 is still in the total price ”, according to the BBH report.
Also, on Monday, Silvana Tenreyro, an external fellow at the Bank of England, said she needed more time to judge how the licensing scheme would affect the labor market, indicating she was in no rush to raise rates. He added that inflationary pressures from rising energy prices are likely to fade quickly.
That being said, it appears that the GBP / USD pair will remain around the 1.3700-1.3850 levels until the BoE monetary policy meeting on November 4. An aggressive “surprise” could propel the British pound through the strong resistance zone of 1.3830, but as investors cut their bets on a rate hike, it could well come at a price.
Mixed macroeconomic data from the US, ignored by investors
An absent UK economic agenda left the GBP / USD at the mercy of the dynamics of the US dollar. Meanwhile, the US economic calendar featured the US House Price Index for August reading (MoM), which rose 1%, down from the 1.3% forecast. Additionally, the S & P / Case-Shiller (YoY) home price indices expanded 19.7% less than the 20.1% expected.
In addition, new home sales in the United States for September increased 0.8 million, better than the 0.76 million estimated by analysts. US consumer confidence for October improved to 113.8 from the expected 108.3.
Technical levels
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