The Bank of England’s Pound Sterling (GBP) index surges to challenge July high, reaching 84.65, according to ING’s FX strategist Chris Turner.
1.3300/3330: The next short-term target for GBP/USD
Turner attributes the GBP’s rise to eurozone and US economic struggles, as well as the BoE’s cautious approach to easing. With Chancellor Reeves set to announce a budget at the end of October, speculations of £20bn in tax increases swirl. However, this may not indicate fiscal tightening, as the funds will address previous cuts in public spending, potentially including £10bn for public sector pay raises.
This budget could lead to a fiscally neutral stance for the GBP, allowing it to outperform, particularly against the USD. The next short-term target for GBP/USD is 1.3300/3330, with support at 1.3100/3120.
Analysis:
The GBP’s strength against the USD is driven by economic conditions in the eurozone and the US, as well as the BoE’s cautious stance. Chancellor Reeves’ upcoming budget, which may include tax increases to address previous spending cuts, could further boost the GBP. This could result in a fiscally neutral budget that supports the GBP’s outperformance against the USD, with short-term targets set at 1.3300/3330 and support at 1.3100/3120.