GBP firms up against the USD – Lloyds Bank

The British pound has begun to show some direction against the US dollar after being rangebound since May as GBP/USD rose to 1.3126 in July – its highest level since September last year, notes Carl Paraskevas, Research Analyst at Lloyds Bank.

Key Quotes

“Most attribute the pound’s new-found strength to a handful of developments. First, there was chatter from the Bank of England about an immediate rise rate rise. Second, there came increased uncertainty about the degree and pace at which the Fed will tighten policy. And third, but least tangible, were arguments that a UK hung parliament will possibly lead to a “softer” Brexit. Whether any of this recent speculation proves true is entirely another matter.”

“Our economists have not pencilled in an interest rate rise from the Bank of England, but acknowledge the risk. Still, news over the recent weeks has been cause enough to see off those in the market who were most bearish on the British pound. In turn, that may prove enough to limit the downside risk in GBP/USD, but we remain doubtful that the latest move higher is the start of a sustained rally.”