Bailey Comments Drive GBP Higher

GBP Moving HigherGBPUSD continues higher on Monday as the rally off the November lows extends to almost 4%. Weakness in USD has been a big driver of the move higher we’ve seen in recent weeks. With traders scaling back their Fed tightening expectations and now looking for the Fed to cut rates early next year, USD has weakened considerably this month and looks vulnerable to further weakness through year end.BOE Governor Pushes Back Against Rate Cut ChatGBP is also being boosted today by comments from BOE governor Bailey. Bailey warned that the bank’s battle against inflation was far from over and while encouraged by the recent drop in CPI, Bailey warned that a further large drop was unlikely to be seen. Speaking with a UK newspaper on Monday morning, Bailey warned that the second half of the bank’s inflation battle would be the hardest and as such, signalled that rates would need to stay at elevated levels for longer, pushing back against those calling for UK rate cuts in the near-future.With domestic and external inflation risks still a threat., Bailey warned that high rates would remain in the UK for the foreseeable future. While this narrative remains intact, GBP looks likely to remain supported near-term.Technical ViewsGBPUSDThe breakout above the bear channel is starting to gather pace now. Price has broken through the 1.2437 level and is now testing the 1.2659 resistance. With momentum studies bullish, the focus is on a continuation higher with 1.2992 the longer-run target for bulls. Notably, we have a buy signal in the Signal Centre today set of 1.2555, suggesting a preference to buy and dips from current levels.