Both the British Pound (GBP) and the Euro (EUR) have shown resilience against the US Dollar, supported by rising expectations of monetary tightening from their respective central banks, according to Scotiabank strategists Shaun Osborne and Eric Theoret [1][2]. The GBP/USD pair remains steady after reaching a one-week high, with the pound benefiting from increased Bank of England (BoE) tightening expectations and heightened sensitivity to higher oil prices. Markets are currently pricing in little chance of a policy move at the BoE's meeting next week, but anticipate approximately 17 basis points of tightening for November 5th and a cumulative 32 basis points by December 17th [1]. The pound continues to follow a bullish trend established since June, with resistance near 1.3650 and support around 1.3480 [1]. However, fiscal risk remains elevated as market participants await the UK budget release in late October, and there is a lack of significant economic data ahead of Friday’s trade and industrial production figures [1].
Similarly, the EUR/USD pair is flat in North American trade after touching a one-week high, underpinned by firmer European Central Bank (ECB) rate expectations in response to higher oil prices [2]. Markets have fully priced in a 25 basis point hike at the ECB's meeting this Thursday, with another 25 basis point increase expected in December [2]. Scotiabank strategists anticipate a hawkish hike, with ECB President Lagarde expected to unveil the latest forecast and signal ongoing concern about upside risk [2]. The EUR has encountered modest resistance at the 200-day moving average (1.1634), with no significant resistance seen until the 1.1680/1.1700 area and support below 1.1580 [2]. Recent data releases have been limited, with only second-tier French industrial production data showing an unexpected contraction in July, and no major top-tier releases scheduled before next week’s ZEW sentiment figures [2].
Technical indicators for both currencies suggest a neutral to bullish outlook. For the GBP, the RSI is marginally above 50, reflecting minimal but positive momentum, while the EUR's RSI is in the upper 50s and climbing, indicating potential for further near-term gains [1][2]. Both currencies have demonstrated a sequence of higher lows and highs, reinforcing the bullish trend since June for the GBP and a tentative recovery for the EUR [1][2].
CONCLUSION
Expectations of monetary tightening by the BoE and ECB, combined with sensitivity to rising oil prices, are lending support to both the GBP and EUR against the US Dollar. While technicals and rate expectations point to a cautiously bullish outlook, fiscal risks and limited upcoming data releases may temper further gains in the near term.