GBP/USD fails to reclaim 1.3600 level as central bank speakers eyed

• GBP/USD fails to hold above 1.3600, slips back to mid-1.3500s.
• Upcoming BoE and Fed speakers will be watched.

GBP/USD has pulled back from earlier session highs slightly to the north of the 1.3600 level and now trades slightly to the north of the 1.3550 mark, roughly flat on the day, though still up by about 0.5% on the week. The pair’s strong rejection of the 1.3600 level, which also coincides with resistance in the form of last Tuesday’s lows just above it, suggests that this week’s technical correction may have run its course. Recall that GBP/USD underwent a sharp drop last week after the BoE shocked markets by choosing not to go with a widely expected 15bps rate hike.

BoE, Fed Updates

BoE Governor Andrew Bailey spoke publically on policy on Monday, reiterating his stance laid out at the last meeting that rate hikes might be appropriate in the coming months if the economy, most notably the labour market, evolves as expected. He is scheduled to speak again on Tuesday at 1600GMT, though his comments might not address BoE policy given that the topic of the panel discussion is inequality. However, BoE Monetary Policy Committee member Ben Broadbent is slated to speak at 1530GMT and his comments might be more pertinent given he is talking about labour shortages before the UK parliament.

GBP/USD traders will also need to keep an eye on Fed speak/developments on Tuesday. News recently broke that Fed Governor Lael Brainard was recently interviewed for the position of Fed Chair and is considered a “contender” for the position. This follows Braindard and current Fed Chair Jerome Powell both being seen at the White House last week. Betting markets see the situation as a two horse race, with Powell still the favourite to be picked as the next Fed chair, though his percieved “lead” has dwindled in recent days. Brainard is considered more dovish than Powell and her nomination as Fed Chair would weigh on the US dollar.

Dovish comments from Fed Vice Chair Richard Clarida and FOMC member Charles Evans on Monday was cited as a reason why the US dollar weakened at the time (and GBP/USD was able to recover back above 1.3500). Neither saw the conditions for rate hikes being met by mid-2022 as USD STIR markets are pricing. FX markets will be watching remarks from FOMC members Daly and Kashkari speak at 1635GMT and 1830GMT respectively in wake of the just released October PPI report (annual rates of PPI remain highly elevated).