British Pound Weakens Amidst Oversold FX Projection
The British pound, or the sterling, weakened to $1.31 on Tuesday after weaker-than-expected labour market data strengthened expectations of a Bank of England interest rate cut next month.
In its most recent prediction, Standard Chartered anticipates that the GBP/USD exchange rate will rebound to $1.35. The bank believes the currency remains undervalued, which allows for additional increases as international investors close their short positions.
It sees scope for gains to the 1.3500 area, but expects notable selling interest above this level, especially with ongoing concerns surrounding fiscal policy.
The sterling came under pressure as regular pay growth slowed to 4.6% in the third quarter, the weakest since February–April 2022, while total pay, including bonuses, rose 4.8%, slightly below forecasts of 4.9%.
Meanwhile, UK unemployment rate climbed to a four-year high of 5.0%, exceeding expectations of 4.9%, as the number of unemployed people increased and employment fell for the first time since early 2024.
Standard Chartered has been bullish on UK government bonds, but has now closed this position with the risk of renewed upward pressure on long-term yields.
Looking at Bank of England policy, there is greater potential for a rate cut at the December meeting following a relatively dovish statement last week.
Although lower rates are generally negative for the Pound, the bank considers that the cuts have been priced in, limiting the scope for further selling.
The Bank of England kept interest rates unchanged last week but signalled that a rate cut in December remains possible as policymakers assess how persistent domestic inflation pressures may be.
The US dollar was making steady progress against the majors on Tuesday as traders positioned ahead of what could be a decisive technical test. Nigeria’s Capital Market to Adopt T+2 Settlement Cycle Nov. 28
