GBP/USDFUNDAMENTAL HIGHLIGHTS:
- GBP Lifted by Hawkish BoE Comments
- Lack of Domestic Data Turns Focus on The US
- Risks That Reopening Plans Need to Wait Provide a Headwind for GBP
GBP has managed to hold onto gains stemming from BoE’s Vlieghe, who provided rather hawkish comments having discussed conditions where a rate hike in 2022 may be appropriate. The move in the Pound highlights the markets elevated sensitivity to changes in the stance from central banks (RBNZ another example). Alongside this, while Vlieghe is leaving the BoE at the end of August, the fact that he is typically more dovish relative to other MPC members may give a sense of where the rest of the member's stance lies. That said, money markets are fully pricing in a move to 0.25% by Nov 22, a further hawkish repricing may see that shift towards Q3 2022.
Looking ahead to next week, BoE Governor Bailey will be speaking on Tuesday and Thursday where GBP traders will be paying close attention to any further hawkish signals.
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BoE Money Markets Pricing in a Q4 2022 Hike
Source: Refinitiv
The economic calendar is light on the UK side, therefore much of the focus will be on the plethora of tier 1 releases across the Atlantic, most notably the US NFP report. As such, the USD will likely dictate much of the price action in GBP/USD. Elsewhere, as Covid cases pick up in the UK following the spread of the Indian variant, the R number has edged higher, now ranging 1.0-1.1 from 0.9-1.1. In turn, with the UK PM sounding cautious over the lifting of all Covid restrictions planned for June 21st, risks that the UK may need to wait could be a headwind for the currency.
US Tier 1 Data Releases
Source: DailyFX
GBP/USD Chart: Daily Time Frame
Source: Refinitiv
| Change in | Longs | Shorts | OI |
| Daily | -14% | 6% | -5% |
| Weekly | -7% | 8% | 0% |
