UK activity backs BoE rate hold

Market reports
Thanim Islam
  • UK activity slows in September
  • GBP sell-off continues
  • Repositioning and profit-taking going into quarter-end?


GBP sell-off continued on Friday following on from Thursday's Bank of England meeting, with markets continuing to tone down future rate hike expectations, and following PMI numbers indicating slower than expected economic activity in September. Trading around USD was relatively tight, but the currency managed to stay near 6-month highs and finish higher for the 10th consecutive week.


Market rates

* Daily move - against G10 rates at 7:30am, 25.09.23

** Indicative rates - interbank rates at 7:30am, 25.09.23

Data points


  • None today.

Our thoughts

A quiet Monday to start the end of the quarter, with the bulk of market moving data out towards the end of the week. For the UK we have final readings of growth for Q2 from Europe, September's inflation numbers, and stateside we will be hearing from a number of Fed speakers as well as final readings of growth for Q2 and core PCE inflation numbers.

The fundamental backdrop continues to add a case for continued strength for USDover the long term, but going into month and quarter-end we could see some profit taking on the two-month gains for USD, as markets look to reposition themselves going into year-end. Any USD weakness should be perceived by USD buyers as an opportunity to hedge again any longer term gains for the currency.

Chart of the day

GBPUSD has been trading lower for two months straight as markets reprice interest rate expectations, as well as acknowledging stagflation risks within the UK economy. From a technical standpoint, the RSI indicator is now suggesting that the move could be oversold given that we have seen a drop of almost 7% in such a short timeframe. A correction could be on the cards if the technical picture is true, and we do see repositioning in the market ahead of month and quarter-end.

Source: Bloomberg Finance L.P.

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