British Pound: BoE tightening bias supports higher rates – UOB
UOB’s Lee Sue Ann notes that the Bank of England has resumed tightening, lifting the Bank Rate to 4.00% and signalling a hawkish shift as inflation risks re-emerge. The Nov Monetary Policy Report projects CPI near 5.0% by mid-2027 and only back to target in 3Q28. UOB now expects another 25bps hike to 4.25% in Feb, with risks skewed towards further tightening.
The British Pound (GBP) remained relatively stable against the US Dollar (USD) near the 1.3400s range on Friday, awaiting key economic data from the United States. Market participants kept a cautious stance ahead of the US Nonfarm Payrolls (NFP) release, which will have a significant impact on US Dollar demand and the GBP/USD pair's trajectory.
The recent uptick in the USD can be attributed to the lower US bond yields and hopes for Iran diplomacy, which keeps the safe-haven USD in a weaker position. The upcoming US NFP report will provide fresh impetus to the GBP/USD pair, as traders anticipate potential moves from the Federal Reserve (Fed) in December. The positive economic backdrop, bolstered by the Bank of England's (BoE) interest rate hike and the reduction of fiscal crisis risks, serves as a tailwind for the GBP.
Technical analysis indicates a constructive near-term bias for the GBP/USD pair, with the pair currently trading above the 200-day Simple Moving Average (SMA) and key Fibonacci support levels. A break above the 61.8% Fibonacci level could propel the pair towards the 1.3560 mark, while a break below the 200-day SMA at 1.3421 might attract support from the 50.0% Fibonacci level at 1.3406.
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