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Mar 28 - 11:55 AM

GBP/USD - COMMENT-Sterling Eyes 2022 Lows As Fed-BoE Rate Expectations Diverge

By Paul Spirgel  —  Mar 28 - 10:00 AM

GBP/USD fell on Monday, extending its recent slide on the growing divergence of policy expectations between the Fed and BoE, with bears likely to push cable toward its recent trend low at 1.3088 nL2N2VV135, and potentially below the March 15 trough at 1.30.

The pound's early 2022 gains are being unwound as hawkish BoE expectations, which had lifted sterling off Mid-December lows by 1.3172, ebb. Markets have priced in 209bp worth of Fed hikes through December versus only +133bps for the BoE over the same period.

Markets suspect the BoE may accept above target inflation to foster growth rather than risk stalling the economic recovery by raising rates at the aggressive pace projected for the Fed.

A move below the March 17 low at 1.3088, would put the March 15 2022 daily low at 1.30 in focus, and with U.S.-UK rate expectations diverging that support is likely to be tepid, leaving November 2021 lows by 1.2854 and beyond vulnerable.

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Source:
Refinitiv IFR Research/Market Commentary

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