GBP/USD holds above 1.3000 ahead of BOE decision - BBH

GBP/USD is holding above key support at 1.3000, BBH FX analysts report.

BOE expected to maintain 4.00% policy rate

"The Bank of England (BOE) is expected to keep the policy rate at 4.00% and reiterate its guidance for 'a gradual and careful approach' to further rate cuts (12:00pm London, 7:00am New York). The swaps market implies 30% odds of a 25bps cut to 3.75% today. Consensus see a 6-3 MPC vote split (vs. 7-2 at the last September meeting) in favor of steady rates, with the dissenters supporting a 25bps cut."

"We expect the BOE to wait until after the UK budget (due November 26) to resume cutting rates. UK inflation is still nearly double the BOE's 2% target and leading indicators suggest UK Q3 real GDP growth (due November 13) will overshoot the BOE's 0.3% q/q projection. Forecast update will be published in the November Monetary Policy Report alongside today's policy decision."

"The expected fiscal drag from the upcoming budget will likely leave room for the BOE to deliver more easing than is currently priced-in (50bps in the next 12 months). To plug a fiscal hole as big as £35 billion, the UK government is seen prioritizing tax hikes over spending cuts. Bottom line: GBP set to keep underperforming on the crosses."