🇬🇧 GBP Edges Higher Against USD as UK Bond Market and Inflation Data Come Into Focus – Scotiabank
The British Pound (GBP) is trading slightly higher — up 0.1% against the US Dollar (USD) — and ranks as a mid-performer among G10 currencies ahead of the North American session on Thursday, according to Scotiabank Chief FX Strategists Shaun Osborne and Eric Theoret.
🔍 UK Bond Market Back in the Spotlight
Investor attention is once again turning to the UK bond market, as the latest auction of 10-year gilts recorded the lowest oversubscription rate since December 2023. This weak demand raises concerns about the UK’s fiscal health, especially with the November 26 budget release approaching — a key risk factor for the Pound.
📊 Mixed Signals from BoE’s Inflation Expectations
The Bank of England’s Decision Maker Panel (DMP) survey showed mixed inflation expectations:
- 1-year inflation expectations ticked slightly higher at 3.5% (vs. 3.4% expected and previously).
- 3-month expectations held steady at 3.7%, matching forecasts.
Meanwhile, widening UK-US bond yield spreads, boosted by a strong US ADP report on Wednesday, are providing fundamental support for the Pound and pushing yield differentials toward 15-month highs.
📈 Technical Outlook: GBP Looking Steady
On the technical front, the GBP’s outlook appears neutral, with the Relative Strength Index (RSI) hovering just below the 50 mark. However, the Pound has regained ground above its 50-day moving average (1.3463) — a positive sign.
Scotiabank sees potential for the GBP to climb back above 1.35, with limited resistance ahead of the mid-1.36 area. In the near term, they expect the GBP/USD pair to trade within a range of 1.3450 (support) to 1.3550 (resistance).