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Apr 27 - 11:55 AM

GBP/USD - COMMENT-Sterling Rebuffed Amid UK Political Angst, Fed Uncertainty

By Paul Spirgel  —  Apr 27 - 09:53 AM

GBP/USD eased in early U.S. trade on Tuesday, surrendering most of a boost that came from above-forecast UK CBI data nL8N2MK3C7 as markets considered Britain's political uproar nL8N2MJ15Y and potential outcomes from this week's Fed meeting.

The CBI data fortified views that the rapid UK vaccine rollout and end of recent lockdowns had spurred growth, assisting GBP/USD to a high of 1.3918 before traders unwound the move.

With the Fed seen on hold for some time, focus will be on the statement and news conference for hints at when it might begin discussing tapering of asset purchases, though that is not expected this week.

Despite the Fed's expected dovish hold, markets are wary of chasing further GBP/USD gains given the pound's 6.5% rise over the last six months.

Cable must now demonstratean ability to rally independent of stimulus to make fresh highs above 2021's 1.4240 peak.

While some expect the UK to begin easing asset purchases by year-end, UK short-sterling futures 0#FSS:, like U.S. Eurodollar futures 0#ED:, show the first 25bp hike beginning in December 2022.
With both the U.S. and UK following similar rate trajectories, recent ranges are likely to remain intact.

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Source:
Refinitiv IFR Research/Market Commentary

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