GBP – Sterling rose on Tuesday, pausing its recent slide after the BoE added more support to the gilts market. However, the day’s low of 1.0999 may not hold as the UK’s combination of inflation and rate-hike vulnerability will challenge even the most astute policymakers.

Commenting on the UK and GBP outlook, Credit Agricole notes: “Potentially, there could be some clear downside risk in cable, I would think, towards $1.05 and euro/sterling towards $0.90. Certainly, we’ll have to wait and see how it plays out given how fluid the situation in the UK in particular is. It is a difficult situation. Like it or not, the BoE is at the forefront of that effort to try to contain the sell-off and hopefully, with some luck, that will help restore market stability. But it’s paramount that in order to succeed, these efforts should go hand in hand with efforts by the government to restore investor confidence.”
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