British Pound: Range holds against US Dollar as UK Budget approaches - HSBC

Sterling’s resilience has seen GBP outperform most G10 currencies over the past month, according to HSBC’s FX Viewpoint. With domestic downside risks likely to take time to emerge and Bank of England rate hikes largely priced in, the bank anticipates range-bound trading in GBP/USD in the near term. It also identifies the UK Budget on 28 October as a key event risk.

Can the Pound Stay Resilient as Event Risks Approach?

"GBP’s recent resilience suggests that its vulnerabilities should not automatically be treated as catalysts for renewed weakness."

"Over the last month, the currency has outperformed every G10 currency except NOK and USD, indicating that these vulnerabilities may take time to translate into renewed weakness."

"We therefore expect GBP/USD to trade sideways in the near term, with domestic downside risks unlikely to materialise immediately."

"Expectations for a Bank of England (BoE) rate increase are already fully priced in, limiting the scope for further gains. The greater risk is that the Bank pushes back against market expectations of a sequence of additional rate rises."

"The 28 October Budget remains a risk event, although the government appears determined to keep it low-key and defer larger fiscal decisions until next year."

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