Because of the gloomy BOE outlook and the weak barriers below 1.1400, risk-taking is still strong.

Oct 06, 2022

VOT Research Desk

In GBP/USD has seen a little stop as it heads near 1.1400.

The S&P 500 is maintaining gains, and the risk-on appetite is still strong.

The BOE sovereign outlook has changed from Stable to Negative according to Fitch Ratings.

GBP/USD Analysis Report

In the Tokyo session, the GBP/USD pair has experienced some little selling pressure as it attempts to overcome the 1.1400 immediate barriers. Investors have kept their long positions in currencies that they regard to be risky. The 10-year US Treasury rates have risen beyond 3.75% after briefly falling. The S&P 500 is maintaining its gains and is not yet ready to give them up.

The US dollar index (DXY) has steadily declined after failing to overcome the 111.00 immediate barriers. The DXY is anticipated to stay volatile as investors wait for the US Nonfarm Payrolls (NFP) report in order to make wise judgments. According to forecasts, the US economy added 250k jobs as opposed to the previous estimate of 315k.

The US economy has been running at full employment levels for the previous few months, it is important to note. Therefore, there is very little room for adding new employment. In addition, the statistics on average hourly earnings is quite important. The labor cost index data is anticipated to show little change, falling by 10 basis points (bps) to 5.1% annually.

Investors are concerned that weak economic fundamentals in the UK might cause the cable to converge on parity. A Reuter’s survey found that analysts are split, with parity and a 3.6% strong British pound in a year being the results.

The Finance Minister Kwarteng’s reversal of the historic tax reduction memoranda prevented the UK economy from revealing the largest increase in borrowing since 1972. But the Bank of England’s (BoE) Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) has been given a negative outlook by Fitch Ratings, which is what is now weighing on the pound bulls. The recent increase in the pound might be severely impacted by the revised outlook, which changed from Stable to Negative while maintaining AA-.

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