Recent economic data from the UK has fuelled speculation that the Bank of England is starting to consider pausing interest rate hikes in the UK. Furthermore, some recent speeches from MPC members have added fuel to this speculation. BoE’s Governor Bailey recently said that monetary policy is much nearer now to the top of the cycle, BoE’s Cunliffe pointed to the mixed signals about the economy, and dovish Dhingra said that the policy is already sufficiently restrictive. The latest GDP data has seen a sharp contraction in the UK economy and terminal rate expectations have fallen from over 6% a few weeks ago to 5.55% at the time of writing. In some rapid re-pricing short-term interest rate markets are only seeing a 67% chance of a 25bps hike next week and a 33% chance of a hold.

So, with GBP weakness potentially ahead, the seasonal weak period for the GBPUSD is quite noticeable. Over the last 15 years, between the 20th of September and the 9th of October, the GBPUSD has fallen over 85% of the time for an average fall of 1.75%. With the Federal Reserve meeting on the 20th of September, could a hawkish message from them send the GBPUSD sharply lower? It is certainly something to look out for.

Major Trade Risks: The major trade risks here would be an improvement in the UK’s economy, a rise in inflation for the UK, or a very dovish Federal Reserve meeting next Wednesday.

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