Expectations of a BoE cut might remain the biggest hindrance for the pound -- at least until the Jan.
30 MPC meeting -- and GBP/USD's slide in the wake of forecast-beating UK PMI data nL8N29T294 provided the latest evidence of this.
Though it rallied initially, on what appeared to be an algo-related move, to a 17-day flash high of 1.3180 it ultimately fell to session lows near 1.3080.
While expectations have diminished somewhat from recent highs, BOEWATCH on Eikon still indicates a 50% chance of a rate cut this month, which has sapped bullish GBP/USD enthusiasm.
Sterling traders are still skeptical about UK growth prospects.
China's coronavirus outbreak could damp global commerce, while Brexit looms on the horizon again with London and Brussels facing a year-end 2020 deadline to negotiate a framework for future relations.
With the diminished global growth outlook and Brexit uncertainties the likelihood of upside data surprises remains limited.
Even if the BoE defers on rates on Jan. 30, a full 25bp cut is priced in by the June meeting and UK short-sterling futures don't show rates rising back to current levels until March 2023 0#FSS:.
Resistance at the post-election high by 1.3516 remains firm, with multiple DMA supports from 1.3079 to 1.3038, and daily cloud base support likely to be tested if the BoE cuts on Jan. 30.
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