GBP/USD buyers attack 1.1400 on chatters about UK politics, BOE’s QT

• GBP/USD stays firmer around a fortnight top, keeps the week-start strength.
• Expectations over BOE’s delay in Quantitative Tightening (QT) recently favored buyers.
• UK Chancellor Hunt’s U-turn on “mini-budget” propelled market’s optimism.
• Fears over UK PM Truss’ future, hawkish Fed bets challenge pair buyers of late.

GBP/USD takes the bids to refresh intraday high around 1.1410 during the early Tuesday morning in Europe, extending the previous day’s upside momentum. In doing so, the cable pair takes clues from the market’s latest concerns surrounding the Bank of England’s (BOE) next move, as well as the UK’s haywire political conditions.

Reports that the BOE is set to further delay QT until gilt markets calm, shared by the Financial Times (FT), recently fuelled the GBP/USD prices. “Central bank expected to bow to investor pressure for a fresh pause to start of £838bn government bond selldown,” adds FT.

Elsewhere, expectations that Britain will overcome the recession woes, despite political jitters, underpins the GBP/USD upside. The quote witnessed a notable upside and triggered the market’s optimism after British Finance Minister Jeremy Hunt, also called Chancellor, reversed the Tory government’s “mini-budget” announcements that created havoc in the UK markets.

It should, however, be noted that the doubts over the UK Prime Minister (PM) Liz Truss’ future, due to the outrage over the policy failure, seems to challenge the pair buyers. Reports also take rounds that some of the British policymakers are preparing to oust UK PM Truss by calling 1922 Chairman Sir Graham Brady. “British Prime Minister Liz Truss met earlier on Monday with lawmaker Graham Brady, who heads up the committee in charge of running Conservative Party leadership contests, The Guardian reported, citing sources from Truss's office,” per Reuters. The meeting couldn’t get any results and might have helped the GBP/USD to remain firmer.

On the other hand, US Dollar Index (DXY) renews a one-week low near 111.85. In doing so, the greenback’s gauge versus the six major currencies ignores the market’s Fed wagers as the CME’s FedWatch Tool prints a nearly 95% chance of a 75 bps Fed rate hike in November. On the same line are the upbeat comments from US Treasury Secretary Janet Yellen, suggesting a strong US jobs market, as well as upbeat US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data.

Against this backdrop, S&P 500 Futures track Wall Street’s gains but the US 10-year Treasury yields retreat to 3.97%, which in turn favors the US Dollar Index (DXY) bears of late.

Looking forward, a light calendar keeps the GBP/USD pair traders directed toward the macros for fresh impulse. That said, the quote is likely to witness further downside amid the DXY’s failures to cheer hawkish Fed concerns amid an absence of major data/events.

Technical analysis

A five-week-old resistance line, around 1.1370 by the press time, restricts short-term GBP/USD upside, which in turn joins doubts over the British economy recovery to highlight the 21-DMA support, close to 1.1145 at the latest.