British Pound: Can conditional resilience hold amid policy scrutiny? – DBS

The Pound has outperformed the Euro over the past week and shown relative resilience as an alternative amid political risks in the US and France, according to DBS Group Research’s Philip Wee. He attributes its outperformance to expectations of a hawkish Fed and ECB, together with the prospect of a Bank of England rate hike. For GBP/USD, however, he flags challenges as the UK Autumn Budget and FOMC decision bring fiscal credibility and monetary policy divergence into focus.

Can the Pound hold firm as policy risks mount?

"GBP/USD faces a difficult balancing act today as the UK Autumn Budget and FOMC decision put fiscal credibility and monetary policy divergence under scrutiny."

"The FOMC is widely expected to leave rates unchanged while keeping the door open to another hike in December."

"However, the European Central Bank is also likely to deliver a hawkish hold tomorrow, while markets are positioning for a Bank of England hike at its November 5 meeting."

"These expectations have helped GBP to hold up better than the EUR over the past week."

"Beyond these policy events, GBP has emerged as a relatively less vulnerable alternative to the political risks in both the US and France."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)