GBP/USD approaches 1.1600 on hopes of fiscal boost from Truss, higher BOE rates

• GBP/USD leads the G10 currency pairs amid broad US dollar pullback, cautious optimism.
• UK Tory Leadership winner Lizz Truss readies £130 billion energy plan, talks of BOE review also gain momentum.
• US ISM Services PMI for August, risk catalysts will be important for fresh impulse.

GBP/USD takes the bids to refresh intraday high around 1.1590 as bulls welcome Lizz Truss's leadership amid hopes of heavy stimulus and a push to the Bank of England (BOE). With this, the Cable pair leads the G10 currency pairs while posing 0.65% intraday gains during Tuesday’s Asian session.

“Incoming Prime Minister Liz Truss has drafted plans to fix annual electricity and gas bills for a typical UK household at or below the current level of £1,971 ($2,300),” said Bloomberg after Truss won a contest to become the next UK Prime Minister. The news also mentioned that She’s under pressure to come up with a solution to surging energy prices that are crushing families and businesses in the UK as Russia shuts off gas supplies to Europe in response to the sanctions imposed following its invasion of Ukraine. 

"I will deliver a bold plan to cut taxes and grow our economy," Truss said after the result was announced. "I will deliver on the energy crisis, dealing with people's energy bills, but also dealing with the long-term issues we have on energy supply," stated UK PM candidate Truss per Reuters.

Elsewhere, her criticism of the BOE’s slow response to the inflation fight is well-known, which in turn hints at faster rate increases from the “Old Lady”, as the UK central bank is often termed.

It should be noted that the US dollar’s pullback also plays a role in the GBP/USD rebound. That said, the US Dollar Index (DXY) fails to justify firmer US Treasury yields while dropping 0.35% to 109.43 by the press time. In doing so, the greenback’s gauge versus the six major currencies extended its pullback from the 20-year high marked the previous day.

The DXY pullback could also be linked to the market’s cautious optimism, as portrayed by mildly positive stock futures, amid expectations that global policymakers will be able to tackle the energy crisis. The recent retreat in the hawkish Fed bets, especially after Friday’s mixed US jobs report, also adds strength to the GBP/USD rebound.

Alternatively, a fall in the UK’s Consumer Spending, as per the data released on Tuesday by payments company Barclaycard probe the bears. “UK consumers cut spending on clothing, DIY and beauty products in August, while business activity contracted, in a sign of “collapsing” demand owing to the intensifying cost of living crisis,” said the Financial Times (FT).

Moving on, risk catalysts are likely to entertain the pair traders amid full markets. Also important will be the ISM Services PMI for August, expected 55.5 versus 56.7 prior.

Technical analysis

Unless crossing a monthly resistance line, around 1.1675 by the press time, GBP/USD remains on the bear’s radar.