British Pound climbs above 1.3400 as Oil rout outshines strong US PMI

The British Pound (GBP) remains stable around the 1.3400 mark during Asian trading sessions on Monday. Traders are awaiting key announcements later in the week. The Bank of England (BoE) will release its interest rate decision on Thursday and will subsequently discuss US jobs data for October on Friday. Economists from Reuters foresee a potential Bank Rate hike to 4.0% from 3.75% at the BoE's November meeting, marking the first increase since August 2023.

This hawkish sentiment may bolster the British Pound against the US Dollar (USD). Analyst Alexander Harvey from Oxford Economics notes that the meeting minutes or statements from BoE governor Bailey could indicate that higher interest rates may not reach the levels currently priced in by the market. Other factors influencing the GBP include the US midterm elections and the October employment report, which is expected to show a slight increase in job growth.

Despite fiscal challenges stemming from rising energy costs, the UK Budget appears to have mitigated concerns by adhering to fiscal rules and preserving GBP15bn of headroom. The UK's economic outlook remains relatively positive, with growth forecast upgraded to 1.2% by the Office for Budget Responsibility (OBR) and political stability expected to persist.

However, markets are already pricing in a series of BoE rate hikes, and the path for GBP to recover is becoming increasingly challenging.