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May 06 - 11:55 AM

GBP/USD - COMMENT-Sterling Withers As US Jobs Data Fuels Fed-BoE Divergence Trade

By Paul Spirgel  —  May 06 - 10:20 AM

GBP/USD fell on Friday, reverting to weakness after a brief lift following a U.S. jobs report nL2N2WY10C that broadly supported the Fed's tightening regime of potential 50 bps hikes, which could keep cable's July 2020 lows by 1.2252 on the agenda.

The pound was down 0.33% at 1.2315, helped by Fed-BoE divergence this week as well as a growing rift among UK policymakers, highlighted by the vote in favor of the MPC's 25bp rate hike showing three preferred a 50bp increase.

BoE chief economist Huw Pill noted two MPC members thought the bank had already done enough nL9N2UI027.

With the Fed resolute on fighting inflation, the BoE reluctance to raise rates aggressively is likely to put further downward pressure on the pound with nearby bearish targets at 1.2252, the early July 2020 low and 1.2075 the late May 2020 low quickly coming into focus.

Year-to-date, the pound is down 8.7% versus the dollar while ECB talk of moving rates into positive territory by the end of the year nL5N2WY2II has pushed EUR/GBP into the plus column for 2022, adding to pressure on sterling.

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Refinitiv IFR Research/Market Commentary


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