GBP rebounds may be capped by recent highs – Westpac

GBP rebounds may be capped by recent highs as political uncertainties rise and consumers risk retrenching, according to Tim Riddell, Research Analyst at Westpac. However, prospects for MPC to lift rates in early November should limit retracements in GBP/USD after its recent surge, he further adds.

Key Quotes

“GBP and short sterling rates rose after MPC’s guidance for potential rate rises in “coming months”. Markets are pricing more than a reversal of the post-Brexitvote cut. The consumer sector is critical and concern over household income being squeezed was clearly cited in the BoE Agents’ Report this week. Although maintaining a positive outlook, the details show that improvements this year appear to be fading, particularly the consumer sector with investment and employment intentions slipping.”

“Rising political tensions (domestic and Brexit) tensions are rising with May’s Florence speech and delayed Brexit talks in the interim. Party conferences (Labour 24-27 Sep, Conservatives 1-4 Oct) may raise domestic pressures.”