The Pound continued its ascent against the greenback on Thursday, rising nearly 250 pips to trade above the key 1.3000 handle. It began its climb during the Asian session, following reports from news agencies that British Prime Minister Theresa may had struck a deal with the European Union on the key area of financial services. GBP/USD did surrender some of these gains initially, with UK manufacturing PMI numbers for October coming in lower than Septembers read however after the Bank of England’s monetary policy meeting, the pound led the USD selloff.
The November inflation report didn’t deliver much of note, with the central bank’s communication rooted in Brexit uncertainty and ‘what if’ scenarios. The BOE did vote unanimously to keep the cash rate unchanged at 75 basis points which was widely expected by markets, however the central bank’s view that the current slowdown was only transitory was interpreted as being relatively hawkish. There were also modest upward revisions to growth and inflation forecasts but the key take way for Sterling traders was that a rate hike was likely coming, although it would be conditional on a favorable Brexit.
Looking forward, in the UK we have October construction PMI’s for October which are expected to be slightly lower while the key risk event for global markets will be the non-farm payrolls read out of the USA. In a week in which our key technical levels of consideration for GBP/USD have been consistently revised upwards in line with a rising pound, we now see downside supports at 1.2935 and 1.2900 and expect any upside to meet resistance approaching 1.3045 and 1.3090.