GBP is ratcheting higher, driven by favourable macro settings and the latest hawkish tone from BoE policymaker Gertijan Vlieghe. As cable flirts with the late-February highs of 1.4237, economists at DBS Bank expect GBP/USD to extend its advance towards the 1.4345-1.4377 region.
A suite of positive factors has underpinned GBP
“The 6 May Bank of England (BoE) policy meeting provided a policy taper lift-off, and last week’s (ended 28 May) hawkish comments from BOE policymaker Gertijan Vlieghe has further fuelled GBP short covering. Vlieghe’s comments of a possible earlier rate hike were read as significant, given he is noted to be a frontrunner to replace BOE chief economist Andy Haldane, whose term expires in June. It appears as a strong testament of the BoE’s growing confidence over the UK’s economic outlook.”
“GBP has benefited from UK’s COVID-19 reopening by its virtue as a vaccination leader, having skipped the threat of a Scottish independence referendum, and with UK May composite PMI rising to 62.0 to register the fastest output growth on record.”
“While there is scope to bring lower GBP’s speculative length, we note the significance of the break of the key 1.4005 resistance pivot which previously held and retarded four attempts. A spillover 1.4237 increases upside pressure for a likely peep into 1.4345- 1.4377, which is the prior double top zone sighted in January and April 2018, respectively.”