GBP/USD rejected at 1.1330 retreats to 1.1220 as Truss’s withdrawal enthusiasm ebbs

• The pound rally fails at 1.1330 and the pair returns to 1.1220.
• Investors scale back BoE hike hopes after Truss's demise.
• GBP/USD likely to reach 1.10 – ING.

The pound has given away most of the ground taken after the announcement of Prime Minister Truss's resignation and remains practically unchanged on the daily chart.  

The pair rallied to session highs at 1.1330 with the market celebrating the departure of Truss’s controversial government, to lose steam shortly afterward and return to the lower ranges of 1.1200.

The market scales back BoE hike hopes

The U-turn on the tax cuts plan and finally the Prime Minister’s demise has prompted investors to scale down hopes of an aggressive BoE rate hike in November. MPC member Broadbent affirmed earlier on Thursday that the bank will respond to Britain’s tax and spending policies, in a hint that interest rates might not rise as much as expected.

Truss came to power with an economics program that roiled financial markets in September, triggering a sharp sell-off on the British pound that forced the Bank of England to step in with a bond-buying program.

The tax-cuts fiasco divided the Tory party and caused the resignation of two of her ministers in less than six weeks, hurting the country’s credibility

GBP/USD could dive to 1.10 – ING

FX analysts at ING see the current downtrend likely to extend towards 1.1000: “Political infighting and the uncertainty of policy continue to demand a risk premium for sterling, where GBP/USD could easily slip back to the bottom end of its wide 1.10-1.15 range.”

Technical levels to watch