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GBPUSD – Headed to 1.3400?
Cable showed some relative strength today as the pair was boosted by EURGBP flows and market expectation of a BoE rate hike later this week. The enthusiasm for the tightening should support the pair into the announcement and could push it towards the key 1.3400 resistance level before Thursday.
However, any further strength in the pound will depend on just how hawkish Governo Carney chooses to be. If the BoE provides a balanced statement minimizing any prospect of further hikes cable could quickly sell off. The pair remains dogged by Brexit concerns so further upside may be limited, but ironically enough the investigation by Robert Mueller into Russia’s activities to sabotage the US election has now given impetus to similar calls for an investigation into Brexit.
Although chances are very slim, it may still provide a way for UK to reexamine its Brexit decision which would, of course, be pound positive. In the meantime, the pair will trade on interest rate expectations and that should provide short-term boost for the bulls.