GBP/USD: UK Rates Markets Reduce BoE Easing Expectations – Scotiabank

The UK budget update was largely in line with expectations. The government will significantly increase taxes and borrowing, but will also spend heavily on priority projects, notes Shaun Osborne, Chief FX Strategist at Scotiabank.

GBP is trading firmer

“UK markets took the news in stride. UK Gilts weakened following the Budget, but the losses reflected the generally weaker tone of fixed income markets (where core European bonds actually performed worse). ).”

“UK rate markets continue to anticipate a November rate cut from the BoE, but, with the budget expected to give the economy a boost relative to its previous state, expectations of a December follow-up have been dampened. reduced significantly. Rate sentiment continues to weigh on Gilts today, but may add support to GBP at least in the short term.”

“Yesterday’s volatile markets have clouded the short-term outlook for the GBP. While spot remains within its recent trading range, yesterday’s heavy selling pressure has left a mark on the intraday and daily charts that may stifle “The gradual one-week rise in Cable from lows of 1.29. Intraday support looks firm around 1.2935, but a move above 1.3043, yesterday’s high, is needed to give the pound a clearer technical boost now.”

Source: Fx Street

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