HSBC’s FX Viewpoint notes recent Pound resilience, with GBP outperforming most G10 currencies over the past month. The bank expects GBP/USD to trade sideways near term, as domestic downside risks take time to materialise and Bank of England hikes are largely priced in, while flagging the 28 October UK Budget as a key event risk.

Pound resilient but event risks loom

“GBP’s recent resilience suggests that its vulnerabilities should not automatically be treated as catalysts for renewed weakness.”

“Over the last month, the currency has outperformed every G10 currency except NOK and USD, indicating that these vulnerabilities may take time to translate into renewed weakness.”

“We therefore expect GBP/USD to trade sideways in the near term, with domestic downside risks unlikely to materialise immediately.”

“Expectations for a Bank of England (BoE) rate increase are already fully priced in, limiting the scope for further gains. The greater risk is that the Bank pushes back against market expectations of a sequence of additional rate rises.”

“The 28 October Budget remains a risk event, although the government appears determined to keep it low-key and defer larger fiscal decisions until next year.”