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GBP is ratcheting higher, driven by favourable macro settings and the latest hawkish tone from BoE policymaker Gertijan Vlieghe. As cable flirts with the late-February highs of 1.4237, economists at DBS Bank expect GBP/USD to extend its advance towards the 1.4345-1.4377 region.

A suite of positive factors has underpinned GBP

“The 6 May Bank of England (BoE) policy meeting provided a policy taper lift-off, and last week’s (ended 28 May) hawkish comments from BOE policymaker Gertijan Vlieghe has further fuelled GBP short covering. Vlieghe’s comments of a possible earlier rate hike were read as significant, given he is noted to be a frontrunner to replace BOE chief economist Andy Haldane, whose term expires in June. It appears as a strong testament of the BoE’s growing confidence over the UK’s economic outlook.”  

“GBP has benefited from UK’s COVID-19 reopening by its virtue as a vaccination leader, having skipped the threat of a Scottish independence referendum, and with UK May composite PMI rising to 62.0 to register the fastest output growth on record.”

“While there is scope to bring lower GBP’s speculative length, we note the significance of the break of the key 1.4005 resistance pivot which previously held and retarded four attempts. A spillover 1.4237 increases upside pressure for a likely peep into 1.4345- 1.4377, which is the prior double top zone sighted in January and April 2018, respectively.”