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The pound rose by about 0.4% against the dollar towards $1.1750 in the European trading session as the market was boosted by the slower-than-expected US inflation rate which pressured the dollar, giving room for the Fed to slow down the pace of interest rate hikes.

• The UK’s economy shrank by about 0.2% in the Quarter’s perspective, hinting that the Bank of England will maintain interest rate hikes which is supportive for the sterling.
• The BoE hiked with 75 basis points in the prior week which already boosted the British currency.
• The mentioned US CPI data came in slower than expected while the monthly data rose with about 0.4% in October, boosting the equities and commodities landscape.
• To fight the inflationary pressure, the British Finance Minister Hunt outlined a 60 billion pound tax rise and spending cuts which may be supportive for the pound as the BoE warns of a recession.

The daily interval rose by about 3.1% out of the Quarter’s developing value area and back into the Year’s perspective, giving the market a bullish bias with a potential slowdown of interest rate hikes from the US Fed and further interest rate hikes of the BoE with mentioned spending cuts to fight inflationary pressure, targeting the developing Year’s VWAP or upper value extreme.

The hourly perspective leans on the +0.5 standard deviation of the VWAP, seemingly with algorithm orders to add to core pound long or dollar short positions. Secondary entry level might be the lower value extreme, called DVAL as the rate trades kind of far from the prior VWAP close level, there is a degree of probability for a reversal towards it, hence managing the risk accordingly to the scenario is crucial.

The rate trades in a micro balanced price range around the highs as market participants might working out large orders while the bracket lows may be targeted for absorption purposes of pound sellers which eventually will be visual by swing failure patterns.

Forecast still pointing to the downside while market participants may establish core long positions around the lower standard deviation of the decade’s perspective. Intraday calculations are mixed with a weaker dollar and might lead or keep the currency pair into the mentioned micro balanced price range with slight tendencies of a reversal for the very moment of typing.

Meanwhile, Asset manager were mixed with long liquidations and short covering in the week as of November 1st COT data, giving the market a potential balanced approach on the median-term perspective. Net position increased while the hold short positions decreased since several weeks while hold long positions are cautionally little changed.

Looking at the central bank’s balance sheet we can observe a increase towards 1,097,143 GBP Million by potential recent monetary supportive operations which were bearish for the sterling currency while possible intervention might supported the pound around the lows. The lower balanced sheet around September eventually helped to reverse the pound fall as well, presumably.

Foreign Exchange reserves increased in October, giving the pound another potential bearish factor for next month. However, the US inflation easing effect should be supportive in the median-term perspective.

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