While the GBP trades softer this morning, with cable easing back below the 1.34 figure, the near-term balance of risks continues to point towards further GBP upside, even if markets have little by way of external data catalysts to digest this week.
Key to underpinning the GBP's solid performance of late, with cable having rallied over 3% from the mid-September lows, is the continued divergence between the BoE, and the FOMC's, chosen policy paths.
The most significant risk to this bullish GBP view remains the precarious fiscal outlook here in the UK, with the 30th October Budget likely to see a rather toxic combination of significant tax hikes, and spending cuts.
In the meantime, however, momentum remains with sterling bulls, albeit with positioning somewhat stretched, meaning a test of the 1.35 handle could well be on the cards before too long.
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