GBP Outlook: Moderate Strength Amid Light Calendar

GBP: Light calendar this week

The pound has started the week modestly stronger, partly helped by some hawkish comments over the week at Jackson Hole by Bank of England Deputy Governor Ben Broadbent, who stressed that inflation is unlikely to slow down as fast as it emerged and that monetary policy will need to remain in restrictive territory for some time.

Aside from that, the pound is being helped by a tentative risk-on/dollar-off as London markets re-open after yesterday’s UK national holiday. This week’s calendar in the UK is quite light, meaning that GBP will likely continue to be driven primarily by external factors. One event to keep an eye on is a speech by BoE Chief Economist Huw Pill on Thursday.

Cable could find support if we are right to think markets may scale back some bullish dollar positions before having confirmations from US payrolls. When it comes to EUR/GBP, it will be all about the EUR leg and the eurozone’s inflation numbers this week. In line with our bullish euro call, we see a break above 0.8600 as very feasible.