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GBP/USD Builds Well on Solid Thursday Close

GBP
  • As noted above on GBP - GBP/USD is making new daily highs ahead of the NY crossover, narrowing the gap with the next area of technical interest at 1.2881 - the 76.4% retracement for the Jul 14 - Oct 4 bear leg.
  • We wrote yesterday that the Thursday range break in the pair was notable, and in particular the close above 1.2786. This wholly erases the downleg posted off the Jan12 high, and breaks the bull trigger at 1.2827 in the process.
  • The budget and DMP survey yesterday were partial factors behind GBP strength, with the 2% NI cut seen aiding consumer spending, while the BoE's DMP survey pointed to still-present underlying inflationary pressure.
  • Solid wages data next week could force a further squeeze on BoE rate cut pricing (66bps cuts currently priced - from ~110bps one month ago).
  • Subdued EUR/GBP is also partially responsible, with the successful containment of the cross below the 50-dma resistance (0.8564 today) helping at the margins. 1w vols saw support as the contract captured next week's UK wages and industrial/manufacturing production data - having printed the lowest since 2019 two weeks ago.

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