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Jul 19 - 11:55 AM

GBP/USD - COMMENT-Sterling Bears Eye April Low As Hawkish BoE Rate Expectations Ebb

By Paul Spirgel  —  Jul 19 - 10:02 AM

GBP/USD fell to a 9-week low at 1.3689 on Monday, a touch above March and April lows by 1.3670, as Delta-variant worries overshadowed the UK's lockdown-ending "Freedom Day" nL1N2OU0E0 and encouraged the market to push back against the notion of an accelerated path to BoE rate hikes.

GBP/USD traders eye support by April 12's 1.3670 low. Below that, minor Fib support can be found at 1.3649, with more significant support at 1.3505's 55-WMA.

The rise in global Delta-variant COVID cases tempering upbeat UK and global growth expectations, which until recently had lifted hopes for BoE asset purchases taper and eventual rate normalization.

But, UK short-sterling futures have moved higher -- meaning lower implied rates -- in the belly of the short-term rate strip.
Green and blue rate packs are up 8-10bps, the flattening of the short-sterling curve hinting at rates remaining low for longer.

Monday's dip in UK rates had a more pronounced effect on pound prices versus the JPY, where GBP/JPY fell 1.2% and EUR/GBP, which gained 0.45%.

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GBP Chart: Click here

Source:
Refinitiv IFR Research/Market Commentary

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