GBP/USD jumps to 1.1500 area as the USD loses ground

• The pound rallies to 1.1500 on the back of broad-based USD weakness.
• Rishi Sunak's victory has restored investors' confidence.
• GBP/USDaiming to 1.10 later this year – ING.

The pound has surged from levels right above 1.1300 on Tuesday’s early US market session, rallying all the way to 1.1500 where it seems to have found some resistance. The pair appreciates about 1.70% on the day to erase previous losses and test its highest levels in more than one month.

Sunak’s victory has eased investors’ fears

The victory of Rishi Sunak in the Tory race and his pledge to restore economic stability are bringing back confidence to the markets, terrified with his predecessor’s economic plan. The re-appointment of Jeremy Hunt as chancellor of the exchequer has increased hopes that the next cabinet will be more market-friendly, which is acting as a tailwind for the British pound.

On the other end, the weaker-than-expected US housing prices and manufacturing data on Tuesday, coupled with the downbeat S&P PMIs released on Monday are increasing concerns about the negative impact on the economy of the Federal Reserve’s radical tightening pace. These latest figures are offering further reasons for the Central Bank to take its foot off the pedal over the coming months.

In this backdrop, the US dollar is losing ground against its main peers, with US Treasury Bonds dropping sharply. The benchmark 10-year yield has plunged from 4.25% earlier on Tuesday to 4.06% at the moment of writing.

GBP/USD expected to drop towards 1.10 later in the year – ING

FX analysts at IONG, however, are skeptical about the pound’s current bullish reaction: “Clearly, 31 October is going to be another massive day for UK financial markets as Sunak/Hunt present their fiscal fix. But backing the dollar as we do, we doubt GBP/USD needs to trade above 1.15 and retain sub 1.10 targets for later in the year.”

Technical levels to watch