Economists at Credit Suisse came into Q4 looking for GBP/USD to trade largely within a 1.0350-1.1400 range. Following the UK’s fiscal U-turn, they compress the expected Q4 GBP/USD range to 1.0750-1.1500.

GBP vulnerable due to BoE’s inability to deliver anything close to priced-in rates

“The market is still pricing in UK base rates of at least 5.00% by mid-2023. We see a peak at 4.50% due to growth fragility combined with the now-less-expansionary Hunt fiscal stance. This leaves GBP vulnerable still to the same problem it faced all year, which is the BoE’s inability to deliver anything close to priced-in rates.”

“We now compress our expected GBP/USD range for the rest of Q4 to 1.0750-1.1500, with the tail risk of a new test of 1.0350 now much reduced. But we still look to sell rallies towards 1.1400 as before, with a stop loss at 1.1500.”