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May 12 - 11:55 AM

GBP/USD - COMMENT-Sterling Hits New 2022 Low As Econ, EU Issues Hint At Further Slide

By Paul Spirgel  —  May 12 - 10:05 AM

GBP/USD fell to a 2022 low of 1.2165 on Thursday after UK data bolstered BoE fears the UK may be slipping toward recession while British-EU discord over Northern Ireland protocols added to pressures pushing cable toward late-May 2020 troughs by 1.2075.

Thursday's UK data included GDP estimates, trade balance and output metrics, which were nearly universally weak and supported the BoE's March shift to a slower rate-hike path nL5N2X427Z.

Pressure on the pound from the BoE's dovish turn has been accompanied by increasing concerns about the state of global growth emanating from China's COVID lockdowns and the Ukraine war, piling more weight on risk-sensitive sterling, though short-covering from sharply bearish positions may slow its descent.

GBP/USD specs have been selling non-stop since late-February, taking net spec positioning from +2,237 contracts on Feb.
20 to the current extreme short at 73,813 contracts as of May 3 -- the biggest since mid-October 2019.

This positioning may stir profit-taking, but sterling must regain the 10-day moving average at 1.2403 to stem the bearish tide. Bulls could regain momentum with a move above 1.2656, the 50% fib of 1.3147-1.2165 April-May slide.

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Source:
Refinitiv IFR Research/Market Commentary

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