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Oct 07 - 01:55 PM

GBP/USD - COMMENT-Sterling By Week's Lows Post-Payrolls, But Steadier Gilts A Cushion

By Randolph Donney  —  Oct 07 - 11:50 AM

GBP/USD fell on Friday to a low of 1.1090 -- near Monday's intraweek trough -- after solid U.S. payrolls data nL1N3172NB and further losses are likely, particularly if next week's U.S. CPI and retail sales data further underpin Fed rate-hike expectations.

Slowing sterling's fall, BoE Deputy Governor Dave Ramsden reinforcing the need for sharper rate hikes to tackle 10% inflation nL8N3182JI, with the market pricing in rate hikes of 100bp in November and December and a bank rate peak near 5.7% by mid-2023.

Markets priced in most of that massive tightening when surging gilts yields forced BoE intervention, though emergency purchases are slated to end on Oct.

A close below the 38.2% Fibo of the rebound from September's 1.0327 record low to Wednesday's 1.1493 high at 1.1048, as well as the kijun and tenkan now at 1.1033/16, could put in play the 50% and 61.8% Fibos at 1.0910/772.

But a full retracement to the 1.0327 nadir may be a stretch in the near-term unless gilts dive after BoE support ends or unless U.S. CPI and retail sales are well above forecast next week.

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Refinitiv IFR Research/Market Commentary


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