GBP/USD stalls at 1.3800 on broad US dollar strength

• The British pound advances despite US dollar strength across the board.
• Brexit: David Frost said, “The problem with the EU proposals on Northern Ireland is that they don’t go far enough.”
• BoE Tenreyro: Not in a rush to lift rates.

The GBP/USD stalled at 1.3800 for the second consecutive day in a row, failing to print a sustained break above the figure, but as of the last couple of hours, it bounced off the daily low at 1.3739, trading at 1.3768 during the New York session at the time of writing. 

The risk-sensitive British pound is advancing, despite US dollar strength across the board. Worries about inflation seem to easy a little, as major US heavy-tech companies, like Facebook, Alphabet, Apple, and Facebook, will unveil earnings for the third quarter, keeping the market sentiment upbeat.

Meanwhile, the US Dollar Index that tracks the greenback’s performance against a basket of peers advances 0.16%, at 93.79, while the US 10-year treasury yield sheds almost three basis points, down to 1.627%.

Brexit woes seem to keep GPB/USD price action within the 1.3700-1.3800 range. On Monday, David Frost, British Brexit main negotiator, said that the EU proposals would not deliver the “freeing up of trade” they would want to see, per Reuters. Further added, “The problem with the EU proposals on Northern Ireland is that they don’t go far enough.”

BoE Tenreyro: Not in a rush to lift rates

Earlier during the day, 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. Moreover added that inflation pressures from surging energy prices were likely to fade quickly.

Tenreyro, still one of the dovish members of the BoE, adopted a different tone to the one portrayed by Governor Andrew Baily, which said that the BoE “will need to act” to curb inflationary pressures.

According to Brown Brothers Harriman in a note to clients, the expectations of a Bank of England tightening remain elevated. “Q4 liftoff is fully priced in, along with four more hikes over the course of 2022,” said in the note.

Across the pond, in the US, the blackout period for Federal Reserve members would leave investors, with a good number of policymakers favoring the bond taper announcement by the November meeting.

In the US economic docket, the Dallas Fed Manufacturing Business Index rose to 14.6, higher than the  6.8 foreseen by economists. Additional details of the publication showed that the Employment Index rose to 28.3 from 26.3, and the New Orders Index climbed to 14.9 from 9.5.

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