British Pound: Resilience remains conditional as policy comes under scrutiny – DBS

With the UK Autumn Budget and FOMC decision bringing fiscal credibility and diverging monetary policy into focus, GBP/USD faces a challenging backdrop, according to DBS Group Research’s Philip Wee. Over the past week, the Pound has outperformed the Euro, supported by expectations of a hawkish stance from the Fed and ECB and the prospect of a Bank of England rate rise, he notes. Political risks in the US and France have also left GBP looking like a relatively resilient alternative.

Pound holds firm as policy risks mount

"GBP/USD faces a difficult balancing act today as the UK Autumn Budget and FOMC decision put fiscal credibility and monetary policy divergence under scrutiny."

"The FOMC is widely expected to leave rates unchanged while keeping the door open to another hike in December."

"However, the European Central Bank is also likely to deliver a hawkish hold tomorrow, while markets are positioning for a Bank of England hike at its November 5 meeting."

"These expectations have helped GBP to hold up better than the EUR over the past week."

"Beyond these policy events, GBP has emerged as a relatively less vulnerable alternative to the political risks in both the US and France."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Find out more.)