Pound Poised for Gains as BoE Stands Firm Against Rate Cuts

Dutch multinational ING's analyst Chris Turner suggests that the British pound (GBP) could see further gains as the UK currency market has yet to fully respond to Bank of England (BoE) Governor Andrew Bailey's remarks at the Jackson Hole summit last Friday. Unlike the U.S. Federal Reserve Chairman Jerome Powell, Bailey expressed ongoing concerns about "underlying" inflation and indicated that the economic cost of tightening monetary policy has now decreased. His comments highlight a divergence in monetary policy between the U.S. and the UK, leading the market to price in smaller and slower rate cuts by the BoE.

Turner's analyses come at a time when there are contrasting movements in various currency pairs. For instance, the AUD/USD pair bounced back to the 0.6800 mark despite cautious market sentiment; the EUR/USD pair edged closer to 1.1200, while USD/CAD marked its third consecutive day of decline. The GBP/USD pair, notably, rose above the 1.3200 mark during European trading hours.

Addressing the technical setup, GBP/USD demonstrated strong performance over the past few sessions, hitting the resistance line of its bullish channel. The price is poised for further gains, potentially reaching the 1.3295 region. The EMA50 continues to support the price from below, reinforcing the expectation for the continuation of the bullish trend in the near and short term. However, failure to break through the current resistance near 1.3210 may result in a bearish correction before making new attempts to lift.

Elsewhere, attention is on several key data points that could further impact market dynamics. Scheduled releases include the U.S. August Consumer Confidence Index at 22:00, among others.

Separately, UBS Global Wealth Management has forecasted further potential upside for the GBP in the coming weeks. The institution believes the BoE could stand out as the only major European central bank not to cut rates in September, possibly delaying any rate cuts to November. This contrasts sharply with both the European Central Bank and the Federal Reserve, which are expected to reduce rates next month.

Overall, the signs point to a continued favorable outlook for the GBP, backed by macroeconomic fundamentals and central bank policy stances. The divergence in interest rate strategies between the U.S. and the UK, coupled with technical indicators, suggests potential for continued GBP strength.