The GBPUSD exchange rate could test the lows from July to August in the coming week.
GBPUSD – Weekly Chart
The price of GBPUSD was rejected at the 1.3577 level, and that is opening up a test of the 1.3142 price level.
Bank of England Chief Economist Huw Pill stated that central banks must make a “clear and credible” commitment to controlling inflation. Pill, who voted against the BoE’s most recent rate cut to 4% in August, said it was not a comment on the current policy stance or the economy. But he did say he backed a “conservative” approach to setting interest rates.
“The credible commitment to an aggressive monetary policy response should inflation get out of hand induce behaviour that makes it much less likely that inflation will get out of hand,” he added.
Markets are watching the U.S. shutdown, but the dollar has been quietly pushing against resistance against the major currencies. After the gloomy outlook for de-dollarization, a resurgence in the dollar’s fortunes is possible, at least on a short-term basis.
Attention will soon turn to the UK’s November government budget, and the Office for Budget Responsibility have warned that the economy is worse than it looked in March. Downgrades to productivity and other revisions are expected to show a £30bn hole in the public finances.
That will have to be patched up through the budget, and there are fears over further tax increases to come for an already fragile economy. An earlier end to the U.S. government shutdown than expected would also be a boost to the dollar in the coming week.
