• The British pound advances for the second day in a row amid risk-on market sentiment.
• GBP/USD: Faces strong resistance at 1.3830, despite BoE hawkish comments.
• US Q3 corporate earnings, keep investors mood in risk-on mode, boosts the risk-sensitive GBP.
• Brown Brother Harriman (BBH): Expectations of a Bank of England November 4 hike, trimmed by 50%.

The British pound climbs during the New York session is trading at 1.3789 at the time of writing. Earlier in the Asian session, the GBP/USD dipped to 1.3756, but as European traders got to their desks, the pair jumped to 1.3829, faced strong resistance, and retreated towards current levels.

US Q3 corporate earnings, keep investors mood in risk-on mode

Sterling’s recovery during the European session lies on the back of the positive market sentiment. Factors like follow-through from last week’s US corporate third-quarter earnings, with Alphabet, Amazon, and Apple Microsoft, left to report earnings this week, keep the market on a positive tone. Investors are gauging from those reports if companies are passing higher production prices to customers, leaving macroeconomic developments on the side.

Additionally, earnings season remains in the driver seat, with elevated inflation and tightening monetary policy, staying in the backseat for the time being,

During the European session, UK Chancellor Sunak will reportedly unfreeze public sector salaries next April. Reports suggest that Sunak will also announce an increase in the national minimum wage to GBP 9.50 per hour. He is due to unveil his budget speech on Wednesday.

According to Brown Brother Harriman (BBH), on a note to clients, expectations of a Bank of England (BoE) rate hike by the November 4 meeting are getting trimmed. 
“WIRP suggests only 50% odds of liftoff November 4, down from being fully priced in at the start of last week.  However, a hike at the next meeting on December 16 remains fully priced in,” per BBH report.

Additionally, on Monday, Silvana Tenreyro, an external member of the Bank of England, said that she needed more time to judge how the furlough scheme would affect the labor market, signaling that she was not in a rush to lift rates. Furthermore, she added that inflation pressures from surging energy prices were likely to fade quickly.

That said, it seems the GBP/USD pair will remain around the 1.3700-1.3850 levels until the November 4 BoE monetary policy meeting. A hawkish “surprise” could propel the British pound through the 1.3830 strong resistance area, but as investors trimmed their bets of a hike rate, it may well be priced in.

US mixed macroeconomic data, ignored by investors

An absent UK economic docket left the GBP/USD pair at the mercy of US dollar dynamics.  In the meantime, the US economic docket featured the US Housing Price Index for August (MoM) reading which rose by 1%, lower than the 1.3% foreseen. Further, the S&P/Case-Shiller Home Price Indices (YoY) expanded by 19.7% less than the 20.1% expected.

Moreover, US New Home Sales for September increased by 0.8M, better than the 0.76M estimated by analysts. The US Consumer Confidence for October improved to 113.8 versus 108.3 expected.