Title : GBP/USD dribbles around 1.1000 despite downbeat UK GDP, BOE’s bond-buying, Fed Minutes in fo

OCT 12, 2022 02:07 AM ET

By:Analysiswatch

GBP/USD is paying little attention to UK economic data for August as it swings around the 1.1000 threshold, breaking a five-day downtrend at the open of London markets for Wednesday's trading. The reason could be related to lower yields and expectations of additional stimulus from the UK authorities.

UK GDP fell by -0.3% month-on-month in August, versus 0.0% expected and 0.2% previously, while industrial production and manufacturing output fell into negative territory during the month.

Earlier in the day, the Financial Times (FT) raised expectations for the Bank of England to extend its bond buying and fueled GBP/USD quotes. The BoE has privately signaled to bankers that it could extend its emergency bond-buying program beyond this Friday's deadline, according to people briefed on the discussions, even as Governor Andrew Bailey warned pension funds that they "have three days left" before the support ends, as mentioned by the FT.

Meanwhile, Cleveland Fed President Loretta Mester joined the chorus of hawkish Fed policymakers and boosted market bets on the US central bank's next move, which defends dollar buyers even as yields retreat. That said, the latest readings from the CME's FedWatch tool show that market players are pricing in a nearly 81% probability that the Fed will raise interest rates by 75 basis points (bps) in November.

GBP/USD traders will continue to look for confirmation from the Bank of England on the FT story for further upside movement. Failure to do so could highlight DXY's strength and remind bears. Also likely to put downward pressure on the cable pair is the existence of the Federal Open Market Committee (FOMC) meeting minutes and hopes of Fed aggression.