We have reached the point where we need to zoom out to paint a clear picture of the forex market. A great example of this is Cable, where the daily chart shows that we are only 60 pips away from the July 2023 high.
GBPUSD Daily
If this is broken, the weekly chart highlights minimum resistance up to the 1.36 area.
GBPUSD Weekly
Sterling initially fell after the July 24 election, but has since recovered all those losses and more. Keir Starmer’s government has made a lopsided start but will provide stability over the next four or five years at a time when the outlook in the US is becoming less certain and Europe continues to be in turmoil.
The UK economy is by no means strong, but it is steadily progressing, and the Bank of England has some room to cut rates. The market sees only a 35% chance of a rate cut at the September 19 meeting, but it is expecting a 26bp cut in November.
The main driver of cable strength lately has been the US dollar side as the greenback has been broadly weakening as the market senses a prolonged cycle of rate cuts and lower interest rates. The market may also be sensing a split in Congress in light of Kamala Harris’ gains in the polls. This should lead to a tighter US fiscal picture and potentially higher corporate tax rates.